Piedmont, Italy, is often considered the birthplace of Italian industry, beginning with textiles in the 19th century, moving to the automotive and aerospace industries in the 20th century, and, more recently, shifting towards IT and services. Piedmont is still one of Italy’s leading innovation regions and has a strong manufacturing base. Yet it faces several economic challenges, including the loss of manufacturing jobs, which declined by 16% between 2004 and 2018. Diversifying the regional economy beyond its traditional strengths in core industrial activities will be important, not least given the large share of small- and medium-enterprises and entrepreneurs operating in low-value added activities, and the relatively few high-innovation firms.

Piedmont’s regional innovation policy aims to strengthen regional innovation capacities in order to boost regional competitiveness and foster innovative and dynamic enterprises. Since its inception, the policy has supported collaborative research and development (R&D), including through innovation clusters, and the promotion of partnerships in important areas such as the smart factory, industry 4.0, life sciences, and the bio-economy. Yet, Piedmont’s strong concentration in manufacturing and sophisticated and specific innovation activities in local core industries are at risk of decline due to on-going industrial transitions. Moreover, where innovation does occur it tends to be created by larger firms, with only limited innovation by small- and medium-enterprises (SMEs) that dominate Piedmont’s industrial system.

Innovation, already a key ingredient to place-based regional development, is expected to keep growing in importance as countries and their regions concentrate on recovering from the COVID-19 pandemic, and actively address global concerns such as climate change, changing demographics, digitalisation and territorial inequalities. Innovation policy, and smart specialisation strategies (S3), are particularly important for shaping the innovation ecosystem in all regions, and especially for regions in industrial transition.

This chapter analyses the main trends, challenges, and opportunities for innovation-led growth in Piedmont and compares it with other OECD regions. It illustrates the economic trends and the performance of Piedmont, including the latest figures on the effects of COVID-19, and how manufacturing remains a driver of productivity and growth. It then explores Piedmont’s regional innovation performance, linking this with global trends and the potential effects of COVID-19, all of which could shape innovation and regional growth in the future.

A fresh look at innovation and innovation policy in Piedmont, Italy could help boost the region’s innovation capacity and process of industrial transition. This chapter evaluates the current approach to innovation in Piedmont and identifies challenges, including a lack of institutional thickness that can stymie the full development of an innovation ecosystem. It begins with an overview of Piedmont’s regional innovation system and current policy, identifying points to consider for the next policy. It then focuses on mechanisms to update and broaden Piedmont’s approach to innovation. From there, it explores how to generate a more integrated regional innovation system. The chapter also examines ways to reinforce the multi-level governance of innovation policy, and ends with a series of recommendations for action.

Despite its strong innovation clusters, Piedmont faces important policy challenges to economic development, including low labour productivity and human capital. This chapter examines how Piedmont’s cluster model and governance can be upgraded to respond to global megatrends and their impact on Piedmont's emerging industries and competitiveness. The chapter starts with a description of the current cluster model in Piedmont and why it needs a rethink. The chapter then proceeds with suggesting a revised cluster model based on three pillars of strong industrial innovation clusters: i) reinforcing the role of clusters as drivers of the regional innovation system, (ii) strengthening cluster collaboration across borders, and (iii) using clusters to support regional vision-setting for future technological and industry development, including advancing social and environmental innovation practices. Addressing these pillars, the chapter discusses how to better integrate the themes of entrepreneurship, digital transformation, innovation diffusion, and up- and re-skilling in cluster programmes.