Beginning in 2018, the OECD and the European Commission’s Directorate General for Regional and Urban Policy (DG REGIO) embarked on a Pilot Action as an experiment to learn what happens when policy makers: 1) expand their thinking on pathways to enhance innovation as a driver of regional development; and 2) are given the opportunity to take actions that would usually not be possible under the constraints of existing governance arrangements, such as regulations or budget frameworks, or embedded policy practices that may stymie innovative programme design. This experiment targeted regions in industrial transition and challenged them to rethink their approach to innovation policy and smart specialisation strategy (S3) design and implementation.

Among OECD member countries, per capita income gaps have declined over the past 20 years, however, gaps between the wealthiest and poorest regions (TL3) within many countries have grown. In 2022, 70% of the OECD population lived in countries where regional income inequality was growing. This is of particular relevance for residents of regions in industrial transition, which tend to have lower GDP per capita than national averages, experience low GDP growth and have lower productivity levels.

For regions in industrial transition, traditional policy solutions – for example, pursuing technology-based innovation and research and development (R&D), channelling resources to large industrial firms, and designing and implementing actions in a sector-driven and/or top-down manner – have not always yielded the necessary results. This is evident in that industrial transition-related challenges, such as generating inclusive growth and improving regional well-being, have not disappeared despite past or present policy actions. This leads to the conclusion that the mechanisms being used to manage industrial transition – from governance arrangements to programming design and implementation – may need to be revisited and recalibrated or alternatively complemented or replaced with a new approach.

This chapter discusses industrial transition from the perspective of its governance and policy implications. It highlights a set of challenges associated with industrial transition today, such as concentrated declines in industrial activity and falling standards of economic and social well-being. In light of these, the chapter emphasises the need for robust governance mechanisms and a place-based policy approach in order to support places undergoing industrial transformation. It also explores the role of experimental governance and policy arrangements in helping to facilitate successful industrial transition initiatives.

The chapter presents a framework of nine dimensions to consider when developing initiatives to support industrial transition – three of them associated with governance practices and six with thematic interventions. It also highlights lessons from experimental initiatives – High Impact Actions – undertaken by regions and countries in the European Union. These lessons can provide insights for policy makers interested in experimental governance and policy approaches for industrial transformation. Additionally, the chapter explores the scalability of these approaches and their intersection with smart specialisation strategies.

This toolbox is designed for policy practitioners and decision makers working to advance industrial transition. It draws on the experiences of the regions and countries that developed High Impact Actions (HIAs) to explore specific experimental governance and policy mechanisms that could facilitate meeting industrial transition aims. It is composed of two elements. The first is a toolkit of policy levers for industrial transition that refines and adds to the toolkit developed in 2019. The second offers an action checklist for policy makers wishing to pursue an experimental approach to designing and implementing policies and programmes targeting industrial transition.

This chapter presents an overview of the ten High Impact Actions (HIAs) carried out as part of the European Commission-OECD pilot action on Regions in Industrial Transition. For each pilot region and country, the chapter presents the main industrial transition challenges, the corresponding HIA undertaken, its governance and management, its impact on overcoming industrial transition challenges, the experimental angle, scalability potential and, finally, policy lessons learned.