On optimal S3 and the concept of complexity - relatedness - Kramer

Presentation by Jan-Philipp Kramer, Partner, Head of EU Services, Prognos Brussels, Belgium at the 26th OECD Spatial Productivity Lab meeting "Smart moves: How data can help discover what regions could be great at" held online on 23 October 2025.

More info: https://oe.cd/6dd

1. On “optimal” S3 and the
concept of complexity /
relatedness
OECD WEBINAR
Smart moves: How data can help discover
what regions could be great at.
Dr. Jan-Philipp Kramer
Online23.10.2025

2. Farbe des Wegelements (links) anpassen über Hintergrundfüllung
Rechtsklick auf die Folie → „Hintergrund formatieren“ → Über „Einfarbige Füllung“ die gewünschte Farbe (keine Grafik- oder
Energiefarben) auswählen.
Research Question 2Research Question 1
What determines an appropriate
level of thematic focus
(bandwidth) of S3?
Under which conditions is a
strategy of related or unrelated
diversification a good option?
Overarching Policy Question
Have authorities selected S3
priority areas that can be regarded
as a good fit?
Background

3. Strategy
document
Region A
Life Sciences
&
Health
Key word list
based on
S3 strategy
DB economic
specialisation
Region Priority AreaDescription 1
III.16
Pharmaceuticals
Ontology 3
NACE
Ontology 2
TECH
Ontology 1
FOR
III.15
Biotechnology
C21.1 -Basic
Pharmaceuticals
C21.2
Pharmaceutical
Preparations
Matching
Algorithm (1)
Optional:
Extended key
word
Description 2
regionalexpert
Task 3
Task 4
Correspondence
analysis
Employment
3.4 Medical
Biotechnology
3.3 Health Sciences
DB technological
specialisation
Patents
Tech. relatedness
Tech.complexity
DB scientific
specialisation
Publication outputs
Publication
excellence
eye@RIS3
CPA -Statistical
classification of
products by activity
Van Looy et al.,
2014
Schmoch, 2008
Task 2
Linkage through
ExAC1.1.
ERDF TO1
projects
‘Centre for
industrial
biotechnolgy‘
Project
Key word list
based on
S3 strategy
Description
Matching
Algorithm (2)
Task 5
%
of projects
linked to
priorities
ERDF TO1
(relevant calls)
Support
enterprises
in biotech
formal /
substantial
Call S3 alignment
Correspondence of thematic
alignment of calls with share of
projects addressing S3 priorities
Methodology to assess S3 in EU27

4. Weneedto answerfirst: How to design an «optimal» S3?
Core
principles
of S3
Diversification
building on
endogenous
capabilities
Entrepreneurial
discovery
process
Selectivity
▪S3requestsregionstofocusoninvestingina
limitednumberofprioritiesthatcouldpotentially
createnewsourcesofcompetitiveadvantage
▪However,neithertheacademicliteraturenor
policydocumentsdefine
▪…howmanypriorityareasshouldbeidentified
byanS3,
▪…ortowhatextenttheseprioritiesshouldbe
similar(or“related”)toexistingregional
assets,
▪…ordifferenttothemtopromotemore
diversification.

5. Regions differ not only in their
innovation capacity
…but alsoin how densely
connected their existing
technologies are —shaping the
scope and risk of diversification.
Towards a theory for a “good S3” that can guide prioritisation
approaches in different regions
Four potential S3 based on levels of regional technological
relatedness and complexity
Prognos/CSIL (2022) elaboration based on Balland et al. (2019).
!

6. Diverse picture across all MS/regions in EU27 in their first-generation
Smart Specialisation Strategies
Source: Prognos/CSIL (2022)
Dead-End Policy
High risk
Low benefits

7. Concept of “optimal S3“can help all types of regions to assess their
positioning
On “optimal” S3 strategies
▪In more developed regions, higher ambition is advisable. The ambition to deviate from
technological relatedness might result in realistic policy targets and help create new engines of
innovation-based growth.
▪In less developed regions, more prudence (i.e., a strategy of more related diversification) is
advisable to avoid channelling resources into new “cathedrals in the desert” and pursue a more
path-dependent and gradual transformation process.
On relatedness and complexity as guiding principles
▪Over-ambition and over-relatedness both pose risks:
▪Too ambitious (unrelated) strategies often fail to deliver transformation.
▪Too conservative (over-related) onesrisk technological lock-in.
▪The results support a contingency approach: S3 effectiveness depends on a region’s position
in the relatedness-complexity space, not on a one-size-fits-all model.
▪For future policy cycles, dynamic monitoring of relatedness and complexity indicators should
guide strategic adjustments and interregional collaboration.

8. Farbe des Wegelements (rechts) anpassen über Hintergrundfüllung
Rechtsklick auf die Folie → „Hintergrund formatieren“ → Über „Einfarbige Füllung“ die gewünschte Farbe (keine Grafik- oder
Energiefarben) auswählen.
Für ausreichend Kontrast ggf. das rote Logo gegen das weiße Logo austauschen. Dafür den Baustein rechts davon benutzen, bündig an
der untere rechte Ecke anordnen und ggf. die Füllfarbe des Rechteckes an die Hintergrundfarbe angleichen.
Why sound prioritisation matters!
8
https://doi.org/10.1080/00130095.2025.2456731

9. 9
“Without strategy,
execution is aimless.
Without execution,
strategy is useless.”
(Morris Chang, Former Chairman
Taiwan Semiconductor
Manufacturing Company)

10. 10
Thank you very much
www.prognos.com
Dr. Jan-Philipp Kramer
Partner | Director
Head of EU-Services
Telefon: + 49 173 2925335
E-Mail: [email protected]
Address
Résidence Palace,
Rue de la Loi 155
1040 Brussels