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EJIM
17,4
390
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European Journal of Innovation
Management
Vol. 17 No. 4, 2014
pp. 390-408
r Emerald Group Publishing Limited
1460-1060
DOI 10.1108/EJIM-12-2013-0136
Path dependence in policies
supporting smart specialisation
strategies
Insights from the Basque case
Jesús M. Valdaliso
University of the Basque Country, Bilbao, Spain, and
Edurne Magro, Mikel Navarro, Mari Jose Aranguren and
James R. Wilson
Orkestra-Basque Institute Of Competitiveness, San Sebastian, Spain
Abstract
Purpose – The purpose of this paper is to apply the path dependence theoretical framework to STI
policies that support research and innovation strategies for smart specialisation (RIS3).
Design/methodology/approach – Review of the recent literature on the phases, sources
of reinforcement and change mechanisms (layering, conversion, recombination, etc.) present in
path-dependent processes, as well as the role played by mental frameworks, political agents and power
relations; and its illustration and testing over 30 years of STI policy development in the Basque
Country.
Findings – How to operationalise the analysis of continuity and change of STI policies supporting
RIS3 policies characterised by path dependence processes. Likewise, learnings from the analysis of
Basque case regarding the types of challenges that European regions will face as they design their
RIS3, according to their degree of maturity in STI policies.
Originality/value – It is the first time that the recently developed tools for analysis of path-dependent
processes are applied to the development of STI policies supporting RIS3 policies.
Keywords Technology led strategy, Innovation
Paper type Research paper
I. Introduction
There is clear recognition in the literature on regional studies about the importance of
path dependence for both economic development and policy-making processes.
However, it remains an under-analysed concept. Specifically, there is little research on
the link between path dependence and policy making, and the important question of
how path dependence in public policies affects regional development. This question is
particularly important in the context of the research and innovation strategies for
smart specialisation (RIS3) that have recently appeared in the literature (Foray et al.,
2009, 2011; McCann and Ortega-Argilés, 2013), and are currently being developed by
all European regions (promoted by European Commission ex-ante conditionality for
receiving European Structural and Investment Funds (ESI)).
The so-called RIS3 guide elaborated by Foray et al. (2012) has defined six steps for
the design, implementation and evaluation of smart specialisation strategies. So far,
both policy makers and analysts have concentrated largely on the specialisation
Financial support from MINECO (Grant No. HAR2012-30948) and the Basque Government
(Grant No. IT807-13) is acknowledged.
 discussion, recommending regions to focus on some specific activities based on their Path dependence
specific regional strengths. When it comes to implementing these strategies, however, in policies
they may be shaped by – or even be in conflict with – pre-existing strategies and/or
policy mixes, or by the historical legacy of former strategies and policies.
Moreover, there is considerable complexity with respect to the STI policies that
might impact on a region in supporting an emergent smart specialisation strategy.
Regions can be seen as “policy spaces” in which policies from different administrative 391
levels are felt (Uyarra and Flanagan, 2010), and it is also the case that STI policies
typically do not correspond to a single policy domain, but constitute a “policy mix” of
multiple instruments from different domains (Flanagan et al., 2011; Magro and Wilson,
2013). Further complexity arises from the organisational governance of STI policies
(Magro et al., 2013), whereby three different layers – political, administrative and
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operative might be distinguished (OECD, 1991; Boekholt et al., 2002).

It is important therefore not only to consider that “history matters” when looking
to implement new strategies, but also to “learn from the past” (Morgan, 2013b),
especially around how to deal with such complexity in policy processes. Considering
policy-making processes as path dependent is a necessary step in order to, first,
understand and learn about institutional contexts, and, second, to design and
implement new regional policies.
In this paper we aim to shed light on the link between institutional context and the
articulation of new STI policies in regions. Specifically we aim to highlight the barriers
and opportunities that a complex institutional context offers for the implementation of
policies supporting emergent RIS3. These correspond to historical processes in which
different elements of continuity and change shape and affect new policy articulation
and therefore regional development. Specifically, the paper will reflect on how
path-dependent processes shape institutional contexts in regions and therefore affect
the implementation of new policies such as those related to RIS3. Indeed, we argue
that it is important to understand these regional specificities before designing and
implementing RIS3, which means examining regional STI context and the mechanisms
of continuity and change that have shaped it.
Our analysis in the paper is focused on a specific case. We explore issues of path
dependence and change in STI policies in the context of a region with a strong
trajectory in proactive industrial policy. The Basque Country region in the north
of Spain is widely acknowledged as a success case, having transformed its economy
during the 1980s and 1990s at a time when industrial policy was widely frowned upon
elsewhere. A measure of this success can be seen in its positioning today in the first
quintile of EU regions in GDP per capita and other key socioeconomic indicators, and
its much stronger position than other parts of Spain in the context of the current
economic crisis[1]. This transformation has been based, among other initiatives, on the
development of extensive knowledge infrastructures (in particular technological and
research centres) linked to its industrial strengths, and support for a series of priority
“clusters”. The resulting rich institutional structure of the region is one of its most
successful factors, but also leads to a complex system. Supporting the development of
a RIS3 in this context, therefore, involves building from a series of existing policies and
organisations, which exhibit a strong inertia reinforced by past success, and therefore
poses new challenges for the region.
The structure of the paper is as follows. In the following section we discuss
the theoretical literature on path dependence in regional economic evolution, with
particular attention to four key issues of the policy-making process: path
 EJIM dependence, institutional change, the sheer complexity of the policy-making system
17,4 and the strong role that agency, power and ideas play in it. In Section III we then
briefly introduce our case study and the methodology employed. Section IV
is devoted to an analysis of the current state of RIS3 in the Basque Country,
highlighting present policy challenges in the implementation of an emerging
strategy. This is followed in Section V by an examination of the sources of path
392 dependence and the mechanisms of institutional change in the system over the last
30 years. Finally, in Section VI we make some conclusions regarding the role of path
dependence (or historical influence) in that process in the Basque Country, and
highlight potential lessons more generally for both advanced and less advanced
regions seeking to implement RIS3.
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II. Path dependence and change in institutions and policy making

According to the seminal works of David (1985) and Arthur (1989), path dependence
applies to processes where the current situation is dependent on its own history. In
other words, decisions taken in the past, sometimes even by pure chance (historical
accidents), become reinforced over time and can increasingly restrain future choices.
Path dependence occurs due to the quasi-irreversibility of investments and the
existence of both network externalities (economies of scale from the supply and
demand side, and effects stemming from technical complementarity and compatibility)
and self-reinforcement effects (SREs) (such as learning effects, coordination effects and
self-reinforcing expectations) (Martin, 2010). Although the concept was first applied to
the analysis of technological change, it was quickly employed to explain the evolution
of organisations, institutions and even territories.
Since Grabher’s (1993) seminal study, path dependence has been a concept
increasingly employed to explain regional development, initially to account for lock-
in situations (i.e. for situations in which the territory remains specialised in old
technologies or activities, unable to shift to more promising new ones). More
recently, evolutionary economic geography has extended its application not only to
the explanation of lock-in situations, but also with regard to different evolutionary
scenarios. Indeed, path dependence, broadly defined, may have both negative and
positive effects on regional economic performance and can be used to explain why
change goes in a particular direction (Martin and Sunley, 2006; Boschma and
Frenken, 2006; Lagerholm and Malmberg, 2009; Martin, 2010; Henning et al., 2012).
In short, path dependence conditions, but not determines regional economic
evolution.
Both political science and sociology have extensively and thoroughly analysed
the role of path dependence and particularly the mechanisms of continuity and
change in social and political institutions and public policies (Streeck and Thelen,
2005; Mahoney and Thelen, 2010; Campbell, 2010). However, analysis of STI policies
and other regional development policies with this focus are scarce to say the least.
The few works that have, somehow, addressed these issues reckon that public
policies tend to evolve along path-dependent trajectories for different reasons: the
influence of historical legacies on present decisions and future policy development;
the existence of learning and coordination effects among the actors and adaptive
mutual expectations; and the intrinsic degree of organisational inertia in political
institutions (Boschma, 2005; Woolcock et al., 2009; Martin, 2010; Flanagan et al.,
2011). Several authors have even suggested a strong role for policy path dependence
in the development of some European regions (Fuchs and Wasserman, 2005; Bathelt
 and Boggs, 2005; Fuchs, 2010; Martin, 2010; Jakobsen et al., 2012; Navarro et al., Path dependence
2013). All of them emphasize that path dependence may lead to different situations, in policies
from lock-in, to incremental change or to a radical breakthrough with the past.
However, most of the studies that do treat path dependence in the context of
regional development present three weaknesses. First, they frequently lack a serious
discussion and analysis of the types, degrees, sources and mechanisms of path
dependence and change (Martin and Sunley, 2006; Henning et al., 2012; Jakobsen et al., 393
2012). As some authors have pointed out, path dependence has been used more as a
metaphor than as a proper theoretical explanation of change and evolution (Sydow
et al., 2009, p. 689). This lack of conceptual clarity makes very difficult to empirically
test path dependence arguments (Dobusch and Kapeller, 2013). Second, the complexity
of policy-making institutions, the fact that they are “composite” systems (Campbell,
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2010; Martin, 2010), comprised of several layers, is not fully considered. Finally, the role
of agency and (political) power is scarcely taken into account in the analysis
(Mackinnon et al., 2009; Henning et al., 2012).
The contribution of this paper is mainly focused on the analysis of mechanisms
of continuity and change in path-dependent policy making. With regard to the
mechanisms of path dependence, and for the sake of clarity and empirical testability,
we employ the recent classification proposed by Dobusch and Kapeller (2013,
pp. 298-300), who distinguish four types of positive feedbacks or SREs[2]: external
SREs, akin to coordination effects; internal SREs, akin to learning effects;
complementary SREs, akin to network and complementarity effects; and
expectational SREs, akin to adaptive mutual expectations of the agents involved[3].
Besides these, path dependence also stems from the quasi-irreversibility of previous
decisions and investments in physical and human capital (Martin, 2010, p. 5), and it is
worth noting that some of these SREs are caused by factors related to power, agency
and the dynamics of politics and policy making (Peters et al., 2005).
With regard to mechanisms for endogenous and transformative change of
institutions, literature from historical sociology and political science (Thelen, 2003;
Streeck and Thelen, 2005) has suggested the following five: layering, conversion,
displacement, drift and exhaustion[4]. Other authors elaborating on those have
suggested at least two further complementary mechanisms: recombination and
delayering (Martin, 2010, 2012). So far, only a few studies on path dependence in
regional development have attempted to analyse some of these mechanisms, and in a
very general and rather suggestive way (Van der Meulen, 1998; Fuchs and Wasserman,
2005; Martin, 2010; Jakobsen et al., 2012).
By layering, new rules, arrangements, organisations and/or actors are added to the
incumbent ones in the system or institution under analysis. By conversion, we mean
the reorientation of an existing institution towards new roles, tasks and/or functions or
the addition of new rules and tasks (i.e. layering) to those that this institution already
performs. Frequently, both mechanisms coexist and interact in explaining incremental
institutional change over time. Displacement refers to the discrediting or pushing to
the side of existing rules and institutions by new ones that are introduced[5]. Rules and
institutions may eventually be transformed by drift, when shifts and changes
in the environment may render them no longer useful; or even die through exhaustion
(Streeck and Thelen, 2005). By recombination, existing or old institutions and
organisations are combined, in conjunction with new resources, to produce a new
structure. Finally, in delayering some components are removed from the system
(Martin, 2010, pp. 14-15, 2012, p. 188)[6].
 EJIM The institution we seek to analyse is STI policy; that is, the whole set of public rules,
17,4 norms and organisations that regulate the STI activities within a given region (Streeck
and Thelen, 2005, p. 12). The governance of STI policy, that broadly speaking may be
seen as a social arrangement or a “social standard” (Dobusch and Kapeller, 2013, p. 300),
is considered as a “composite” system (Martin, 2010, p. 13) or “complex” institution
(Campbell, 2010, pp. 102-103), made up of different layers: political, administrative and
394 operational (Boekholt et al., 2002; Braun, 2008). Within each layer, there are different
units and levels of analysis: institutions, organisations, networks and individuals.
Finally, institutions are assumed to be “continuously created and recreated by
a great number of actors with divergent interests, varying normative commitments,
different powers, and limited cognition” (Streeck and Thelen, 2005, p. 16). In other
words, power and agency matter to account for both continuity and change in path-
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dependent processes (Mahoney and Thelen, 2010; van der Heijden, 2010). There is an
ongoing and never ending process of competition and cooperation between
institutions, organisations and individuals (both rule makers and rule takers) within
and across the three aforementioned layers (Peters et al., 2005; Streeck and Thelen,
2005). In this sense there is no such thing as a single or unique “policy maker”
(Flanagan et al., 2011). Even ideas and discourses may affect both continuity and
change of the institutional path dependence (Campbell, 2010). In any case, policy ideas
along with the STI policy co-evolve with the economic development of the region and
its sheer system of innovation (Nelson, 1994; Mytelka and Smith, 2002; Sotarauta and
Srinivas, 2005; Braun, 2008).

III. Data and methodology

We employ a detailed case study to analyse continuity and change of STI policy in path
dependence processes because it allows us to take a holistic view of such a complex
issue, while at the same time considering a detailed sequence of events (Bennet and
Elman, 2006; Dobusch and Kapeller, 2013). The Basque Country is a good case to be the
object of analysis since there is no region in the EU that enjoys more political
autonomy (Cooke and Morgan, 1998; Morgan, 2013b), it is one of the few cases
recognised by the literature as a real innovation system (Cooke et al., 2000) and it
reflects a complex innovation system where policies from at least five different levels
are being felt (Magro and Wilson, 2013). In addition, it is a region in which STI policy
has had a continuity path; partly as a result of having been a region governed by the
same party during that time (in isolation or coalition), but also due to broad-based
agreement on this path across all political parties (Aranguren et al., 2012b).
Our case draws on many different sources on information: existing literature,
official documents (laws, plans, white papers, etc.) and records of the Basque
Government on STI policy, semi-structured interviews with different Ministers of
Industry and policy makers of the Basque Government, and the reconstruction of the
different teams of policy makers in the Ministry of Industry for every political
constituency from 1980 onwards[7]. However, rather than providing a rich narrative on
the case, which may be consulted elsewhere (see Aranguren et al., 2012a; Navarro et al.,
2013; Porter et al., 2013), and for the sake of empirical testability, we have revised the
Basque STI policy over the last 30 years with the specific aim of identifying the sources
and mechanisms highlighted by the theoretical literature on path dependence and
institutional change (as presented in Section II).
Building on the literature on path dependence in firms and organisations (Sydow
et al., 2009; Dobusch and Kapeller, 2013) we have distinguished three phases of path
 dependence that are in line with three distinct stages and strategies for economic Path dependence
development in the Basque Country (and their correspondent discourses and ideas): in policies
a first stage of path emergence and creation in the 1980s, where contingency matters
most; a path of self-reinforcement in the 1990s, where SREs played a key role; and
a third stage of variation and evolution but within the already-established path
(Aranguren et al., 2012a; Navarro et al., 2013). For every stage we have selected the
most outstanding components (organisations and rules) of the STI policy in the three 395
layers of the system (see later on Table II).
As for the sources of path dependence, we have revised the Basque STI policy
trying to find out, at every stage, elements and proxies for the four types of SREs
pointed out by the literature, along with a fifth type of “other” effects. All of them
become more important as time goes by and the STI policy moves forward in its
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path-dependent trajectory, particularly from 1990 onwards (see later on Table III).
Then, we proceed in the same way for the mechanisms of change over the whole
period, although in this paper we have only selected the three ones that currently
appear to be the most widely employed, those of layering, conversion and
recombination (see later on Table V). Finally, we have taken as proxies for political
power and agency within the system the names of the key political posts (President of
the Basque Government and Ministry of Industry, and their political affiliation) and
high government officials in charge of the STI policy (Vice-Ministry of Technology,
Director of Technology and Directors of the two most important economic agencies of
the Basque Government, SPRI and EVE) (see later on Table IV)[8].

IV. Policies for RIS3 in the Basque Country: current state and challenges
ahead
As Morgan (2013b, p. 122) puts it: “Far from having to design a smart specialisation
strategy from scratch, therefore, the Basque Government can legitimately claim that it
has been building-up such a strategy for the past thirty years”. The essence of such
strategy is expressed in their Science, Technology and Innovation Plans (the last and
ongoing plan is the so-called PCTI-2015) and in the thematic plans elaborated to
develop the R&D-based diversification strategies contained therein (Biobasque,
Nanobasque, Energybasque and Advanced Manufacturing strategy). The mechanisms
of path dependence operating in these strategies are likely to be quite diverse, as can be
deducted from the different degrees of formalization, starting points, diversification
goals and ways, economic impacts and actors involved in these R&D-based
diversification strategies (see for more details Table I).
Smart specialisation strategies should identify priorities for STI investment (both
vertical or thematic, and horizontal or functional) drawing upon entrepreneurial
discovery processes that involve a wide range of regional agents (Foray, 2013). With
regard to thematic priorities, the PCTI-2015 chose eight fields: biosciences,
nanosciences, advanced manufacturing, transport and mobility, digital world,
science industry, ageing and energy. According to Morgan (2013a), there were too
many priorities and they were too broadly defined. This can be considered the result of
an historical layering process, in which new fields of prioritisation were added to the
ones based on existing strengths. In a context of abundance of resources, the Basque
STI policy did not reject any significant demand coming from incumbent economic and
technological agents. Following Orkestra (2013), both to come to terms with the
principles of smart specialisation strategies and to adapt to the period of crisis and
scarcity of resources, the Basque RIS3 should pursue two kind of objectives: on the one
 EJIM Advanced
17,4 Bio and Nano manufacturing Energy

Formal strategy Yes: Biobasque and No (draft in 2012) Yes: Energibasque

NanoBasque
Pre–existing Very small Very large Very large
capacities
396 Strategies of Modernisation (users of Modernisation Modernisation (smart
diversification KETs) (users of KETs) grids)
Radical foundation Extending (off-shore wind
(new bio-nano firms) energy)
Extending (suppliers to Radical foundation (wave
the bio world) energy)
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Combination (electric car)

Impact Very small at present, veryVery large at Medium at present, large
large in the future present, very large in the future
in the future
Government role High Small Medium
Relationship among Prevalence of the new Prevalence of the Balance
pre–existing and old (mainly
new actors Technology Centres)
New hybrid New physical CICs: Biogune New virtual CIC: New physical CIC:
centres Biomagune and Nanogune Margune & Energigune
Later on supported by Microgune
BERCs: DIPC, BPC,
Table I. BCMaterials, Polymat
R&D based smart Biophysics and
specialisation strategies Neurosciences
in the Basque Country
in the 2000s Source: Navarro and Magro (2013)

hand, to reduce the number of priorities and narrow their focus; and, on the other hand,
to prioritise those areas which allow for the diversification and upgrading of a more
extensive part of their economy in the short-middle term, even if this is at the
cost of a less disruptive diversification. With this aim, it will be necessary to set in
motion different mechanisms of change: combination (e.g. the convergence of
micro-nano-biosciences initiatives), delayering (e.g. abandon the priority on the science
industry), conversion (e.g. putting the emphasis of the bioscience strategy on
reorienting traditional sectors, either as suppliers or users, towards the bio and health
system, rather than on the creation of new bio firms).
With regard to horizontal priorities[9], both external (OECD, 2011; Morgan, 2013a)
and internal (Orkestra, 2013) analysts have agreed that, as a result of its historical
development, the Basque innovation system and STI policy show a clear bias towards
technology and applied research, in detriment of science and basic research, on the one
hand, and development and non-R&D-based innovation, on the other hand. From its
inception to the present, STI policy has been oriented towards the supply-side, rather
than to the demand-side or to increasing the absorptive capacity of firms; and to
the development of knowledge capabilities more than to the exploitation of them.
In seeking to address these imbalances, once again we can identify a layering process
(adding new organisations that provide technology services to Basque firms, and the
creation of the so-called Basque Science, Technology and Innovation Network or
 RVCTI), and not so much conversion, recombination, replacement or delayering. Path dependence
As a result, the RVCTI is composed of an incredibly high number of organisations in policies
(158 members in 2013), quite fragmented and scarcely interlinked and coordinated
among them. Not surprisingly, one of the main measures announced by the current
Basque Government has been the rearrangement of the RVCTI.
There are two other historical major weaknesses of the innovation system and
Basque STI policy, both closely connected with the entrepreneurial discovery process: 397
the lack of coordination and cooperation among the different departments and
government levels, on the one hand; and the need for more robust monitoring and
evaluation systems, on the other (OECD, 2011; Morgan, 2013b; Orkestra, 2013). The
legal system, which is typically characterised by strong inertia, has significant impact
on governance issues. But within the competences and powers assigned by law to one
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particular institution, it tends to be much room for manoeuvre and improvement. For
instance, the real challenge with regard to the overall governance of the Basque STI
policy and innovation system does not consist so much in the creation by law of new
institutions, but in securing that the Basque Council for Science, Technology and
Innovation, created by the decree 191/2007, actually fulfils the mission with which it
was entrusted. As to the monitoring and evaluating system, strengthening it is crucial,
taking into account that the capacity of a region to design smart specialisation
strategies depends greatly on what it has learned from the past, which in turn is
contingent of the monitoring and evaluation mechanisms existing in the region.

V. Path dependence and evolution in the Basque STI policy

In order to understand the present situation in the Basque STI policy field it is
important to learn from the past and to reflect on how path dependence has affected the
present conditions and the development of the regional innovation system. Through an
analysis of the history of Basque STI policy, we can identify three main stages, which
are unified around a core path towards building a system that can support the
upgrading and diversification of Basque industry. Moving through each of these
phases we can analyse changing roles at the political, administrative and operational
layers of the system (see Table II).
The roots of the Basque STI policy, with a strong focus on technology, date from the
early 1980s. The regional government was created from scratch in 1980 and it had to
cope with a very difficult socioeconomic situation in a climate of political and
institutional uncertainty (Aranguren et al., 2012a; Navarro et al., 2013; Porter et al.,
2013). The main aim of the STI policy was to build up a technology system which
could support the upgrading and diversification of the industrial fabric existing in the
Basque Country. Thus the department primarily responsible for STI policy was the
Industry Department, which through its two main agencies –SPRI and EVE managed
the main instruments and programmes at administrative level. In this initial phase the
government made a strong investment in physical infrastructures, such as technology
centres and technology parks, with large fixed setup costs.
The path taken in the 1980s was clearly reinforced afterwards. According to the
Ministry of Industry and Vice-President of the Basque Government in the fourth
constituency, “in the early 1990s it was taken a path that, subsequently, became very
difficult to exit from”[10]. During the second (1990s) phase, therefore, STI policy
evolved along the previous path, with some adjustments and a particularly strong
emphasis on technology and quality management. On the one hand, the focus was
mainly based on supporting and promoting the technology infrastructures that were
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Table II.
Country, 1980-2012
policy in the Basque
Evolution of the STI
Emergence and path
creation, 1980s
STI policy focus Focus on technology,
priorities related to building
the technology system and
physic infrastructures
related to industrial needs
Institutions-political Leadership of the
layer Department of Industry
(Vice-Ministry of
Technology) and secondary
role of the Department of
Education
Institutions- SPRI (Industry government
administrative layer agency) manages the
technology programmes
EVE (Basque Energy
Agency) manages the
energy strategy and
programmes
Institutions- Creation of Technology
operational layer Centres
Creation of the first
technology park
Source: Authors’ elaboration from Aranguren et al. (2012a)
Path dependence, 1990s
Continues the focus on technology
and its infrastructures (with an
emphasis on quality management)
First diversification strategies:
aeronautics, ICT, creative industries
Leadership of the Department of
Industry (Vice Ministry of
Technology) and secondary role of
the Department of Education
Active role of the provincial councils
(Diputaciones)
SPRI manages the technology
programmes
EVE manages the energy strategy
and programmes
Creation of Euskalit (quality
management)
Creation of the Basque STI Network
Support to Technology Centres
Creation of Technology Parks
Creation and support of Cluster
Associations
Support to elite research groups in
the public university
17,4
398
EJIM
Path dependence and evolution (through diversification),
2000s
Focus on science, technology and innovation
Diversification based on R&D. Launch of specific strategies,
such as bio, nano, energy, etc.
Department of Industry in charge until 2011 (Vice-Ministries
of Technology and Innovation between 2005 and 2009, then
merged under a single Vice-Ministry)
Increasing inter-Department competition from 2011 onwards:
Presidency, Education and Health
Active role of the provincial councils
SPRI and EVE charged with new roles
Creation of the Basque STI Council
Creation of the Basque Innovation agency (Innobasque)
Creation of the Basque Foundation for Science (Ikerbasque)
Creation of agencies aimed at developing specific strategies
(nano, bio) linked to Industry Department and SPRI
Creation of new hybrid centres to support Basque Strategy:
CICs (basic and applied research, dependent on the
Industry Department);
BERCs (basic research, dependent on the Education
Department)
Orkestra-Basque Institute of Competitiveness
Support to technology centres and promotion of merger and
alliances among them
Support to cluster associations
Support to universities
 already created (i.e. technology centres and parks), to create new ones and to give a Path dependence
stronger emphasis on quality management (where new organisations such as Euskalit in policies
were created). On the other hand, in this decade we can also find the first roots of the
diversification strategies and a stronger emphasis on proactive, selective industrial
policy, as the creation and support of cluster associations demonstrates.
The 2000s, or third phase, is also characterised by continuity in technology policy
and programmes. There was continued support to previously established actors such 399
as technology centres, alongside strong investment in science, technology and
innovation through R&D-based diversification strategies. However, it is a period
dominated by increasing complexity at all three layers of the system. In the political
layer, the Industry Department’s supremacy in STI policy was challenged by other
departments (especially by education) that developed their own policies and
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instruments in the field. Provincial Councils at sub-regional level, which had already
appeared on the scene in the previous decade, also began to constitute another
important agent. This increasing complexity is also observable in the administrative
layer, with the creation of several agencies and organisations related to different
government departments or linked to specific specialisation strategies (e.g. Biobasque
or Nanobasque). In addition, in the operational layer there was a strong investment in
the creation and support of new hybrid research organisations (CICs and BERCs)
related to these strategies.
Looking at the evolution through these three stages of Basque STI policy we can
identify sources of path dependence in each of them (see Table III). As might be expected,
SREs have become more important since the 1990s. Concretely, we can identify strong
internal and external SREs, mainly based on political continuity[11], both in the political
and administrative layers (the supremacy of the Industry Department and its agencies
during the last decades is a sign of this). Additionally, the launch of “guiding discourses”
(Fuchs and Wasserman, 2005), first on competitiveness, quality and internationalisation
in the 1990s, and then on innovation and the knowledge society (“second economic
transformation”) in the 2000s, have, through adaptive mutual expectations and
coordination effects, become widespread across the different layers and among the
individuals and organisations of the system, constituting an important source of path
dependence. The configuration and continuity of actors within the regional innovation
system over time can be seen as an internal SRE that, together with the shared policy
beliefs built through different programmes and networks (complementary SREs),
represent other remarkable source of path dependence. Finally, it is essential to remark
that one of the main sources of path dependence has been the quasi-irreversibility of
investments in technological infrastructure. The huge fixed costs of this type of
infrastructure makes it very difficult to take decisions to leave the technological path
once adopted, but has also contributed to create a situation of “institutionalised
complexity” within the system.
In addition to the role of SREs, continuity and path dependence in the Basque
Country cannot be separated from power and agency. First of all, as mentioned
previously, the regional government was ruled by the same party (in isolation or
coalition) until 2009 and over that time we can highlight the role of three Ministers of
Industry who had a strong influence in their respective governments: Javier Garcı́a-
Egocheaga (in the 1980s), Jon Azua (in the 1990s), and Josu J. Imaz (in the early
2000s). As Table IV shows, there has been some continuity also in key positions for
STI Policy such as the Director of Technology, which has also contributed to path
dependence. The remarkable continuity of a small team of policy makers and high
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17,4

400
EJIM

Table III.
Sources of path

STI policy, 1980-2012

dependence in the Basque
Path reproduction and evolution (through
Emergence and path creation, 1980s Path reinforcement, 1990s diversification), 2000s

External SRE (utility “Guiding discourses” on competitiveness, “Guiding discourses” on innovation and
resulting from others quality [y] knowledge society
adopting the same policy) Vested interests of agents in the Vested interests of agents in the administrative
administrative and operational layers and operational layers
Stability of the STI system (layers and Stability of the STI system (layers and agents)
agents) Shared policy beliefs (“mental maps”) through
forums and participatory programmes
Internal SRE (utility Political continuity (until 1987) Department of Industry’s rule of thumb Department of Industry’s rule of thumb
resulting from learning by Learning by doing and by experience in SPRI (“building on what already exists”) Political continuity until 2009
doing, using and (1981) and EVE (1982) Political continuity Continuity of the system’s architecture
interaction) Continuity of the system’s architecture Shared “mental maps” of policy-making teams
Shared mental beliefs (“mental maps”) of
policy-making teams
Complementary SRE Technology Centres created by the Basque Technology Centres and Parks, Cluster Technology Centres and Parks, Cluster
(utility resulting from other Government and by the Provincial Council of Associations, Quality Programmes Associations, Universities, CICs and BERCs
agents and organisations Biscay
of the system following the
same path)
Expectational SRE (self- Strong leadership of the Basque Government Strong leadership of the Basque Vested interests of different agents and
reinforcing adaptive Government self-reinforcing expectations
mutual expectations of the Vested interests of different agents and Shared policy beliefs (“mental maps”) through
agents) self-reinforcing expectations forums and participatory programmes
Other Path creation drawing on the existing Continuity in the team of policy makers Continuity in the team of policy makers within
resources and capabilities (laboratories and within the Industry Department the Industry Department (until 2009)
technology centres) Quasi-irreversibility of investments in Quasi-irreversibility of investments in
Continuity in the team of policy makers technological infrastructure technological infrastructure
within the Industry Department (until 1987) Organisational inertia Organisational inertia

Note: SRE, Self-reinforcement effects

Source: Authors’ elaboration from Aranguren et al. (2012a)
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(I) (II) (III) (IV) (V) (VI) (VII) (VIII) (IX) (X)
Constituency Constituency Constituency Constituency Constituency Constituency Constituency Constituency Constituency Constituency
1980-1984 1984-1985 1985-1987 1987-1991 1991-1995 1995-1998 1999-2001 2001-2005 2005-2009 2009-2012

Lehendakari (and Carlos Carlos José A. José A. José A. Ardanza José A. Juan J. Juan J. Juan J. Patxi Lopez
ruling political Garaikoetxea Garaikoetxea Ardanza Ardanza (PNV-PSE) Ardanza Ibarretxe Ibarretxe Ibarretxe (PSE)
party (s)) (PNV) (PNV) (PNV) (PNV-PSE) (PNV-PSE) (PNV) (PNV) (PNV)
Ministry of Javier Garcı́a- Juan C. Isasti José I. Arrieta Ricardo Jon Azua Javier Retegui Josu J. Imaz Josu J. Imaz Ana Aguirre Bernabé
Industry (and Egocheaga (PNV) (PNV) Gonzalez-Orús (PNV) (PNV)a (PNV) (PNV) (PNV) Unda (PSE)
political party) (PNV) (PSE) (2001-04) Ana
Aguirre (PNV)b
Vice-Ministry of Jesús Lobo Jesús Lobo Anton Manuel Tello José Luis Carlos Bilbaod Iñaki Iñaki Iñaki Juan
Technologyc (1982-84) Aranzabe Aguiriano Telletxeae Telletxea Telletxea Goicolea
Director of Anton Anton José A. Lopez Tomas Joseba Joseba Joseba Joseba Joseba Edorta
Technologyf Aranzabe Aranzabe Egaña Arteaga Jaureguizar Jaureguizar Jaureguizar Jaureguizar Jaureguizar Larrauri
(2005-2008)
Alberto
Fernandez
Director of SPRI Juan M. Romeo Jesús Alberdi Jesús Alberdi Roberto Javier Retegui Antonio Aitor Aitor Mauri Tomas
(1982-83) Velasco (1991-92) Antonio Gallarreta Cobanera Cobanera Lazkanog Hernani
Jesús Alberdi Gallarreta
Director José I. Arrieta José I. Arrieta Miguel Ignacio Marco- Iñaki de la Sota Jacinto Lobo Jesús Jesús M. Goiri Jesús M. Goiri José I.
of EVE (1982-84) Martı́nezh Gardoqui M. Goirii (2005-06) Hormaeche
José I.
Hormaeche

Notes: aJavier Retegui was Vice-Ministry of Industry and Energy between 1992 and 1995; bAna Aguirre was Director of the Ministry of Industry cabinet between 1991 and 1995,
Adviser of the Ministries of Industry between 1995-1998 and 1999-2004; cVice-Ministry of Technology and Industrial Strategy until 1991; Vice-Ministry of Technology and
Innovation from 1991 to 1995; Vice-Ministry of Innovation and Industrial Development from 1999 to 2005; Vice-Ministry of Technology and Industrial Development from 2005 to
2009; Vice-Ministry of Innovation and Technology from 2009 to 2012. In the fifth constituency technology was ascribed to a new Vice-Ministry of Competitiveness. In the eighth
constituency, innovation was under the command of another Vice-Ministry of Energy and Innovation, headed by José I. Zudaire, a high government official with political
responsibilities in the Department of Industry from 1993 onwards; dCarlos Bilbao had been Director of Industrial Competitiveness in the 4th constituency; eIñaki Telletxea was
Vice-Ministry of Industrial Policy between 1999 and 2001. He was Director of Internationalization of SPRI until 1995; ffrom 2005 onwards, innovation has been ascribed to another
Directorship, in charge of fields such as entrepreneurship and information society; gMauri Lazkano was Director of the Ministry of Industry cabinet between 1995 and 1997;
h
Miguel Martinez was Director of CADEM, a public enterprise owned by EVE, between 1981 and 1985; iJesús M. Goiri was Director of Energy between 1980 and 1985
Source: Authors’ elaboration from Boletı́n Oficial del Paı́s Vasco (BOPV)
Path dependence

the Basque

1980-2012
in policies

in the STI areas of

Table IV.
Key political posts

Department of Industry,
401
 EJIM government officials within the Industry Department has reinforced some rules
17,4 of thumb, such as that of “building on what it already exists”, and “shared policy
beliefs” (Peters et al., 2005) around the positive effects of clusters, innovation and
internationalisation[12].
In spite of this path-dependent trajectory of Basque STI policy, there has been some
room for change within the system. Our analysis in Table V identifies different
402 mechanisms of institutional change in the political, administrative and operational layers
over the last three decades. More precisely, the government consciously attempted to put
into practice several de-lock-in (or path broadening) strategies by adding new layers,
actors and organisations to the system (layering), and by assigning new tasks and roles
to some of its agencies, SPRI and EVE in particular (conversion), or by introducing more
competition to get funds (such as changes in the financing system of technology centres
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and cluster associations). Additionally, the launch of diversification strategies in the

1990s and in the 2000s constitute the main change mechanism over the last two decades,
as it has provoked the creation of new organisations to support and accompany those
strategies both at administrative and operational layers. These new mechanisms have

Layering Conversion Recombination

Political layer Competition of other New roles to the

departments within the
regional Government
(education in the 2000s; and
health since 2009 onwards).
Administrative Creation of the UET (1988)
layer Creation of Euskalit (1990s)
Creation of Cluster
Associations (1990s)
Creation of Saretek (1997)
Creation of Innobasque (2007)
Creation of Ikerbasque (2007)
Definition of diversification
strategies based on R&D
(2000s)
Creation of Strategic Agencies
(bio, nano) (2000s)
Operational Creation of clusters (1990s)
layer Creation of BERCs (from 2008) university research
Creation of CICs (physical)
(2000s)
Creation of Orkestra (2006)
Table V.
Mechanisms of
change in the Basque
STI policy, 1980-2012 Source: Authors’ elaboration from Aranguren et al. (2012a)
Vice-Ministry of
Technology in the 1990s
and 2000s (Innovation)
New roles to SPRI Creation of
(internationalization in Innobasque from
the 1990s, ICTs and previous organizations
information society in (Knowledge Cluster,
the 2000s) Saretek) (2007)
New roles to EVE
(Energibasque in 2000s)
Creation of BERCs from Creation of CICs
(distributed) (2000s)
groups (2000s) Concentration process
of technology centres
(mergers and alliances
in the 2000s)
Change in the funding
policy of technology
centres (1990s)
Change of the legal
status of technology
centres
 come most frequently through a layering process as the regional innovation agency Path dependence
(Innobasque), specific strategic agencies (Biobasque and the like), cluster associations or in policies
research centres (CICs and BERCs) have been created from scratch or in a few cases by
processes of recombination (see Table V for more detail). This has lead to a complex
ecosystem of institutions and actors in the regional innovation system that has also
altered some of the pre-existing rules and agency among actors. This complexity, while it
has brought change and has altered the previous path, implies some risks and 403
challenges, namely risks of institutional cannibalism as a consequence of austerity times
(Morgan, 2013b) and a large cost of coordinating efforts.

VI. Conclusions
Path dependence literature has tried to go beyond general statements such as “history
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matters” and a metaphorical application of the term by specifying, among other things,
when it can be said that a process is path dependent (when contingency and self-
reinforcing processes are present), which phases can be distinguished in such processes
(preformation, creation and development), which are the specific sources of path
dependence (different types of self-reinforcing processes) and which change mechanisms
can be applied in order to avoid lock-in effects (layering, conversion and the like).
Path dependence processes can be found in different unit of analysis: individuals,
organisations, networks, institutions, technologies, industries and territories, each one
having its particularities. This paper has applied these new analytical tools to STI policy,
up to now relatively untouched by operational analysis of path dependence. This is of
paramount importance for the design and implementation of smart specialisation
strategies (RIS3), because they will not take place in a vacuum and do not start from
scratch, but from a given context of previous institutions, policies and actors.
The analysis of how path dependence processes have operated in the Basque
Country’s STI policy is particularly insightful because, on top of having political
autonomy in STI policy, this has been one of the few European regions which can
legitimately claim that it has been building-up smart specialisation strategies for the
past 30 years (Morgan, 2013b). In that sense, the Basque STI policy has gone through
three distinct phases of path dependence, which allows us to understand the types of
challenges that European regions will face as they design their RIS3, according to their
degree of maturity in STI policies.
Specifically, the challenges that the Basque Country is today facing, having passed
relatively successfully (see Morgan, 2013b) through earlier phases of STI policy
development with strong elements of path dependence, reveal clearly the pros and cons
of having advanced so much in STI policies and strategies. On the one hand, scientific
and technological capabilities and institutions have been created and there has been
evident policy learning for the design and implementation of such complex strategies
and policies as RIS3 (Foray, 2013). Yet on the other hand, there are enormous inertia
and resistances to new approaches, both in existing ideas or mental frameworks, and
in incumbent actors and constituencies of these policies with vested interests. The
development of STI policies in a context of abundance of resources has led to a very
complex and cumbersome system, somehow unable to co-evolve and adapt to the new
context, unless severe reforms are brought about. Those should imply, on the one hand,
interrupting the specific self-reinforcing processes that underlie the current STI policy;
and, on the other hand, propelling change mechanisms, mainly from a different type
than the ones that have prevailed up to present (delayering, recombination, conversion
and displacement vs layering).
 EJIM In the same vein, analysis of how the Basque Country developed its first phase of
17,4 STI policy offers some clues about the pros and cons that regions without previous or
much experience in STI policies must face when tackling the design and
implementation of smart specialisation strategies. Regions with less developed STI
policies and strategies can learn a lot from those that have already established policies
and undertaken policy-learning processes. In fact, one of the points in which the path
404 dependence literature should be completed is in the insertion of the lessons taken from
the diffusion and policy transfer literature (Dolowitz and Marsh, 2000) into the analysis
of the change mechanisms, as Campbell (2010) somehow suggests.
In regions with less developed STI policies the main difficulties do not come from
existing actors and organisations, with strong capabilities developed in some
particular areas, but from the lack of capabilities in the private sector and the absence
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of previous policy learning in government. Needless to say, the lack of existing

institutions and actors implies that, on the contrary to the current challenges facing the
Basque Country, mechanisms such as layering are likely to be more significant than
delayering, recombination and the like. Furthermore, instead of thinking first about
what the path dependence literature names change mechanisms, regions with less
developed STI policies and strategies should pay more attention to the identification of
triggering events and self-reinforcing mechanisms that would allow them to move
forward in their smart specialisation strategies and supporting policies. Additionally,
as Martin (2011) says, in this first phase the capacity for policy to influence the
direction of the path is higher.

Notes
1. Its unemployment rate is the lowest amongst the Spanish regions: 15.8 per cent, against the
Spanish average of 26 per cent (third quarterly of 2013).
2. Dobusch and Kapeller (2013) contend that with the exception of “increasing returns”, which
may or may not be a feature of “positive feedbacks”, most of the different labels for positive
feedback effects used in the path dependence literature, and in particular self-reinforcement
effects, can be used interchangeably. Although assuming the same theoretical propositions
posited by these authors for the four types of positive feedbacks, we opt in this paper for the
term “self-reinforcement effects”.
3. Sydow et al. (2009) and Dobusch and Schübler (2013) follow the more traditional
classification of Arthur’s (1989) increasing returns effects, whereas Martin (2010, p. 5)
employs not only Arthur’s effects but David’s (1985) network externalities as well.
4. While institutional change can also be the fruit of external shocks and/or can be merely
adaptive, the focus of these authors and our focus in this paper is on changes that are both
internal in their roots and truly transformative over time.
5. In this displacement, however, the existing rules and institutions often do not disappear:
“change occurred, not through explicit revision or amendment of existing arrangements, but
rather through shifts in the relative salience of different arrangements within a ‘field’ or
‘system’” (Streeck and Thelen, 2005, p. 22).
6. Campbell (2010) has suggested two further mechanisms – bricolage and translation – that
we are not considering. The former may be seen as another version of recombination, rather
than displacement, as Campbell himself suggests. The latter is akin to the layering
mechanism, although it implies a mechanism of transfer from elsewhere.
7. Further references on the sources employed can be seen in Aranguren et al. (2012a, p. 183-
185). Most of the official documents can be consulted at www.politicaindustrialvasca.net
 (last accessed 8 November 2013). As to the interviews, we have combined more than ten Path dependence
semi-structured interviews with different policy makers of the Department of Industry with
published interviews, biographies and memories of some key politicians in this field in policies
(Bizkarguenaga Atutxa, 2001; Illarramendi Lizaso, 2004; Ardanza, 2011).
8. We have identified all the individuals that occupied political posts in the Department of
Industry (today of Economic Development and Competitiveness) from 1980 onwards,
although we have only shown in Table IV those more closely related to STI policies. 405
9. The structures or functions of the innovation system considered as a priority for action
either in order to develop unique strengths or because there are serious system failures
in them.
10. Jon Azua, interview, March 2013. See also Azua (2006).
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11. In the 1990s, under Azua’s rule, a new team of policy-makers acceded to the Department of
Industry that remained there until 2009, for almost 20 years: in particular, Ana Aguirre,
Iñaki Telletxea, José I. Zudaire and Joseba Jaureguizar (see also Table IV on key political
individuals).
12. Juan I. Zudaire, interview, June 2010. See also Aranguren et al. (2012a).

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Corresponding author
Professor Mikel Navarro can be contacted at: mikel.navarro@deusto.es

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