Innovation is increasingly seen as the key to increasing or sustaining long-term job creation and economic growth, particularly in economies struggling with heavy debt burdens and the challenge of fiscal consolidation. While economy-wide policies are clearly important, innovation tends to be a highly place-based activity. The present chapter therefore looks at evidence on the role of regions in fostering innovation and at the ways in which regions could better support innovation-driven growth.

This chapter focuses on the regional dimension of the shift towards a greener economy, which is currently a major policy priority for OECD countries. Its principal emphasis is on the potential contribution of cities and urban policies in meeting this challenge, but it also looks at the potential for renewable energy development to drive both cleaner growth and the revival of some rural areas. Finally, it also looks at multi-level governance of water, one of the most important and yet environmentally sensitive goods.