Two Birds with one Drone: How Technological Cooperation in Europe can Target the Twin Transition and Regional Cohesion

The future competitiveness and prosperity of Europe’s economy depends on the greening and digitizing of Europe’s regions. The success of the so-called twin transition depends not just on improving the EU’s capacity to innovate in green and digital technologies, but also spreading the benefits of that innovation across its regions so that it is a transformation for all, not just some regions. However, there is an innovation divide that threatens to worsen cohesion between EU regions as the richest and most innovative continue to pull ahead of the pack in the technologies that will shape the future EU economy.

It is therefore important at this juncture, with the future of EU Cohesion Policy in the spotlight, for policymakers at the EU, national and regional level to explore ways for regions to develop mutually beneficial linkages around twin transition technologies with other regions across the EU.

Our new study, Technological capabilities and the twin transition in Europe: Opportunities for regional collaboration and economic cohesion, evaluates the complementarity in twin transition technological profiles between European NUTS-2 regions and gives a clear view of the untapped potential for linkages between regions of different economic development levels and across national borders.

In the 288 NUTS-2 regions considered in the study, 211,790 patents were developed from 2017-2021 in a green or digital technology. But this patent output is far from evenly distributed across regions. Following the distinction of regions in the EU’s Cohesion Policy of more developed regions (with a regional GDP above the EU average), transition regions (between 75% and 100% the EU average in regional GDP), and less developed regions (less than 75% average regional GDP), the study finds that the more developed EU regions currently produce 80% of the patents in twin transition technologies.

Particularly in patents for digital technologies, there is also a core-periphery divide, meaning more developed regions in Europe’s center outperform transition and less developed regions in the South and East. Scandinavian regions also demonstrate a high patent output in digital technology, especially Stockholm and Helsinki.

For green technologies, for which there are fewer patents overall, a concentration is also apparent. The development of new technologies remains focused in Europe’s more developed regions.

And yet, regional patent output is only part of the story. No region is a master of all technologies alone; all regions stand to gain from finding other regions with complementary technological capabilities that are relevant for mastering the twin transition. Indeed, already around half of the patents analyzed in the study were the result of an inter-regional collaboration, but three-fourths of those linkages were within national boundaries. EU regions should ask themselves if they have looked sufficiently far afield to find the right collaborators to accelerate their development of future twin transition technologies.

To find the right matches for a given region’s technological profile, the study uses the concept of “relatedness” and “complementarity”. The more related a region’s different technological capabilities are, the less risky it is for them to invest in innovation in those areas, thereby increasing their potential to do so. If another region can add to that region’s technology mix with their own patents in related technologies, that constitutes a complementary match.

Each region’s technological capabilities are also rated for their complexity. Patents for Artificial Intelligence are, for example, more complex than patents for sustainable packaging materials or HVAC systems due to the resources they require, and the education required to develop cutting edge advancements in their respective fields. Developing a profile of related, complex technologies gives a region a leg-up economically over others. That region’s hard-to-replicate advanced technology secures a foundation for future competitiveness and economic growth.

In other words, if a region has high relatedness density and high complexity in its patent output, developing new related technologies is relatively low-risk and high-reward. If another region can complement them in relatedness and complexity, then a linkage could be beneficial.

In contrast, low-relatedness and low-complexity in current technological capabilities means the path ahead for a given region is high-risk, low-reward. This is the worst situation to be in. Seeking inter-regional linkages where low relatedness exists would be a poor strategy.

More developed regions in the EU show higher potential than their poorer counterparts to develop digital technologies, where they already demonstrate a huge lead on other regions in the volume, relatedness, and complexity of their digital technology patent output.

The potential to develop new twin transition technologies looks different for the EU’s transition regions. They show a weak potential in most digital technologies, especially in high-complex digital technologies. They simply cannot compete with the comparative advantage of more developed regions. Transition regions do however have potential in many green technologies, even exceeding that of more developed regions.

In the case of transition regions, there is low-risk potential in green technologies, given the relatedness density of many of their green technology patents, but these also offer low-rewards to their economies—even though they aid in the overarching goal of the green transition.

In a final step, the study assesses the untapped potential in inter-regional linkages with respect to the twin transition technologies by determining whether there is strong complementarity between regions’ respective technological capabilities. The results show massive untapped potential for EU regions to combine their capabilities in the advancement of new green and digital technologies.

To strengthen cohesion and develop Europe’s technological capabilities, inventors and businesses should pursue twin transition technologies in which their home region has high potential and foster inter-regional linkages with other regions that demonstrate the complementary technologies to help in this regard.

In this vein, policies should aim to exploit potential through the support of entrepreneurship, educational reforms, research capacity-building and institutional change, to ensure local opportunities are activated and obstacles are removed that prevent the mobility of resources to the development of new twin transition technologies.

The good news is the study finds numerous opportunities within green and digital technologies to match regions across the EU—far more than can even be acted upon. The result is a broad menu of linkage options in need of a guiding principle. Where possible, this principle should be to link more developed regions with transition and less developed regions with greater frequency. This will be particularly relevant when developing and refining the EU regions’ Smart Specialisation strategies and when building inter-regional innovation partnerships in the context of the cohesion policy framework 2021-2027.