Industrial evolution and competitiveness in the Basque Country: insights from a comparison with Baden-Württemberg

BACHELOR´S DEGREE FINAL PROJECT Indus ial E olu ion and Compe i i eness in he Basque Coun y: Insigh s om a compa ison wi h Baden-Wü embe g Deg ee in Economics Cou se 2024/2025 Au ho : And és Eche e ia Cas o P o esso : Jesús M. Valdaliso Gago INDEX 1. In oduc ion 2 1.1. Backg ound and P oblem S a emen : Indus ial E olu ion and Compe i i eness in Regional Con ex s 2 1.2. Signi icance o he S udy and Jus i ica ion o he Compa a i e Analysis: 3 1.3. Objec i es o he Resea ch 4 2. Theo e ical F amewo k 4 2.1. De ining and Concep ualizing Regional Compe i i eness: E olu ion and Key App oaches 4 2.2. Regional Benchma king: Founda ions, Types and Limi a ions 7 2.3. The Regional Compe i i eness Index (RCI) as an Analy ical F amewo k: S uc u e and E olu ion 9 3. Me hodology 13 3.1. Selec ion o Regions: Jus i ica ion o he compa ison be ween he Basque Coun y and Baden-Wü embe g 13 3.2. Uni o Te i o ial Analysis: Conside a ions o NUTS 1 s. NUTS 2 Le els 14 3.3. Da a Sou ces and Va iables: Analysis o he Regional Compe i i eness Index (RCI 2.0) 2016, 2019, and 2022 14 3.4. Complemen a y Quali a i e Da a and Analysis 15 3.5. Me hodological Limi a ions and Challenges 16 4. Compa a i e Analysis o Regional Compe i i eness 16 4.1. O e iew o Economic De elopmen T ajec o ies and Cu en Posi ion o he Basque Coun y and Baden-Wü embe g 16 4.2. E olu ion and Compa ison o he O e all RCI Sco es: Basque Coun y and Baden-Wü embe g (2016-2022) 18 4.3. Compa a i e Analysis o he 11 RCI Sub-indices: Iden i ying S eng hs and Weaknesses 20 5. Indus ial Con ex and O e all Policy Analysis 25 5.1. Indus ial E olu ion in he Basque Coun y: Key T ends, T ans o ma ions, and Challenges in Recen Decades 25 5.2. Indus ial E olu ion in Baden-Wü embe g: Key T ends, T ans o ma ions, and Success Fac o s 29 5.3. Iden i ica ion o Po en ial Lessons o he Basque Coun y om he Baden-Wü embe g Expe ience 31 6. Conclusions 32 6.1. Summa y o Key Findings om he Compa a i e Analysis 32 6.2. Implica ions and Conside a ions o he Basque Con ex 33 6.3. Limi a ions o he S udy and Fu u e Resea ch Di ec ions 34 7. Bibliog aphy 35 2 FIGURES INDEX Figu e 1. De e minan s o compe i i eness a di e en le els. 6 Figu e 2. RCI 2.0 amewo k s uc u e 11 Figu e 3. E olu ion o egional GDP pc 17 Figu e 4. Sha e o Indus y and Mining in To al Employmen . 18 Figu e 5. EU Regional Compe i i eness Index 2.0 -2022 edi ion o BW and PV Sco es (2016–2022) 20 Figu e 6. EU egional Compe i i eness Index 2.0 Sco es 2022. 25 Figu e 7. Summa y o Basque Regional S a egy 2008-2020. 29 TABLES INDEX Table 1. Weigh ing scheme o he h ee RCI sub-indices, di e en ia ed by de elopmen s age. 12 Table 2. E olu ion o RCI 2.0 11 pilla s sco e (2016–2022) 21 3 Abs ac This s udy explo es he indus ial e olu ion and egional compe i i eness o he Basque Coun y h ough a compa a i e pe spec i e wi h Baden-Wü embe g. Using he Regional Compe i i eness Index (RCI) 2.0 as he main analy ical ool, alongside complemen a y quali a i e analysis, he esea ch assesses he de elopmen ajec o ies o bo h egions du ing he las decades. The aim is o be e unde s and he ac o s ha ha e in luenced hei espec i e pe o mances and o e lec on possible a eas o imp o emen o he Basque con ex . While Baden-Wü embe g gene ally main ains s onge compe i i eness indica o s, he Basque Coun y shows no able p og ess in speci ic dimensions. Ra he han p esc ibing conc e e solu ions, he s udy seeks o con ibu e o a b oade discussion on egional de elopmen s a egies and o highligh elemen s ha could in o m u u e policy conside a ions. Keywo ds Regional compe i i eness; indus ial policy; Basque Coun y; Baden-Wü embe g; benchma king; inno a ion sys ems; RCI 2.0; egional de elopmen ; compa a i e analysis; e i o ial s a egy. 4 1. In oduc ion 1.1. Backg ound and P oblem S a emen : Indus ial E olu ion and Compe i i eness in Regional Con ex s The s udy o indus y, egional compe i i eness, and economic de elopmen has been a cen al ocus o my academic aining, mo i a ing his esea ch p ojec . This in e es o unde s and why ce ain egions (wi hin and ac oss na ional bo de s) expe ience di e en de elopmen al pa hs was, in ac , a key eason behind my decision o pu sue a deg ee in economics. The dynamics o how some egions manage o excel in e ms o compe i i eness, inno a ion, and o e all quali y o li e ep esen a co e a ea wi hin economic and e i o ial analysis. In his con ex , he Basque Coun y holds a pa icula ly compelling signi icance o me, no only as my home egion wi h i s dis inc his o y o egional au onomy bu also due o i s sus ained s ong economic and social indica o s in compa ison o neighbou ing a eas. This has os e ed a deep in e es in esea ching he ac o s and causes o his no ewo hy pe o mance. Mo eo e , o gain deepe insigh s in o how he Basque Coun y migh u he enhance i s compe i i e edge, he s udy o success ul models in o he Eu opean con ex s o e s a aluable pa h. Speci ically, Baden-Wü embe g wi h i s well-es ablished indus ial s eng h and high le els o compe i i eness, s ands ou as a pa icula ly ele an case o compa ison. Consequen ly, his esea ch unde akes a compa a i e analysis be ween he Basque Coun y and Baden-Wü embe g o examine hei indus ial de elopmen and compe i i eness ajec o ies, aiming o ex ac insigh s ele an o cu en and u u e egional challenges. 1.2. Signi icance o he S udy and Jus i ica ion o he Compa a i e Analysis: In oday's wo ld, unde s anding wha makes some egions mo e compe i i e han o he s is inc easingly c ucial. Fo egions like he Basque Coun y, wi h i s indus ial his o y and aspi a ions o con inued economic and social p og ess, ho oughly analysing he ac o s ha d i e hei compe i i eness is key o making in o med decisions and planning o he u u e. This s udy is ele an as i con ibu es o a deepe unde s anding o hese aspec s wi hin he speci ic con ex o he Basque Coun y, a egion wi h i s own unique cha ac e is ics and a his o y o ela i ely s ong economic pe o mance. In an e a ma ked by apid echnological change, he u gency o ecological ansi ion, and he ongoing ans o ma ion o indus ial sec o s, knowing how o enhance egional compe i i eness is undamen al o sus ained p ospe i y. To lea n how he Basque Coun y could become e en mo e compe i i e, his s udy adop s a compa a i e app oach by selec ing ano he success ul Eu opean egion as a poin o e e ence. Baden-Wü embe g, in Ge many, has been chosen due o i s s ong indus ial base, commi men o inno a ion, dense ne wo k o small and medium-sized en e p ises ( he 5 enowned 'Mi els and'), and e ec i e collabo a ion be ween uni e si ies, businesses, and public ins i u ions. Addi ionally, i is impo an o no e how p e ious esea ch al eady iden i ies Baden-Wü embe g as a aluable compa ison o he Basque Coun y. Fo ins ance, in a wo k by Na a o A ancegui and o he s (2011), i is explained how Baden-Wü embe g is a egion ha is close in many ways o he Basque Coun y, making i use ul o compa ison. Fu he mo e, in he epo s ha O kes a p oduces on he compe i i eness o he Basque Coun y (O kes a, 2020; O kes a, 2021; O kes a, 2022 O kes a, 2023), Baden-Wü embe g—alongside Uppe Aus ia—is also used as a e e ence, because hey sha e simila i ies and pe o m g ea economically and socially. Needless o say, bo h he Basque Coun y and Baden-Wü embe g sha e a s ong indus ial adi ion and he idea ha inno a ion is key o g ow h. The e o e, analysing which s a egies and ac o s ha e led Baden-Wü embe g o be so compe i i e can gi e us aluable ideas and lessons o he Basque Coun y o con inue s eng hening i s economy and i s u u e. 1.3. Objec i es o he Resea ch The cen al aim o his esea ch is o conduc a compa a i e assessmen o he indus ial e olu ion and compe i i eness o he Basque Coun y and Baden-Wü embe g. The ul ima e goal is o o iden i y ele an insigh s ha could in o m and po en ially suppo he economic de elopmen o he Basque Coun y. This s udy will sys ema ically add ess his aim h ough a egional benchma king me hodology, guided by he ollowing main aims: Fi s , o es ablish a ounda ion o compa ison, he s udy will unde ake a quan i a i e assessmen o compe i i eness le els in bo h egions, p ima ily u ilizing egional da a such as GDP pe cápi a and Regional compe i i eness in he las decades. La e , he analysis will ocus on he Regional Compe i i eness Index (RCI) 2.0 indica o o e a sho e and mo e ecen ime ame. This ini ial analysis will iden i y key pe o mance di e ences and ends, in o med by es ablished heo ies o egional compe i i eness and benchma king. Second, he esea ch will explo e he unde lying ac o s ha ha e shaped he economic pe o mance o he Basque Coun y and Baden-Wü embe g. This will in ol e examining bo h quan i iable da a and quali a i e aspec s, such as indus ial policies, inno a ion sys ems, and he oles o key ins i u ions in each egion. Thi d, he s udy aims o iden i y speci ic, e ec i e s a egies and policies implemen ed in Baden-Wü embe g ha ha e con ibu ed o i s compe i i eness. A c i ical e alua ion will be made ega ding he po en ial o adap ing and applying hese lessons o he Basque con ex . Finally, he esea ch will syn hesize he indings om he compa a i e analysis o unde s and he undamen al d i e s o pe o mance a ia ions. This will culmina e in he de elopmen o conclusions and po en ial policy ecommenda ions o he Basque Coun y, d awing aluable insigh s om he expe ience o Baden-Wü embe g. 6 2. Theo e ical F amewo k 2.1. De ining and Concep ualizing Regional Compe i i eness: E olu ion and Key App oaches Compe i i eness s ands as a co ne s one concep wi hin bo h economics and he ield o egional de elopmen s udies, e en hough i s ini ial oo s lie in s a egic managemen a he i m le el and in b oade ade heo y. When conside ing he na ional scale, a widely accep ed de ini ion, as a icula ed by he Wo ld Economic Fo um (WEF), de ines compe i i eness as “ he se o ins i u ions, policies, and ac o s ha de e mine he le el o p oduc i i y o a coun y” (Schwab, 2012; Schwab & Po e , 2007). This mo e adi ional pe spec i e p edominan ly emphasizes economic ou pu and e iciency, wi h p oduc i i y iden i ied as he p ima y engine o g ow h (Po e & Ke els, 2003; K ugman, 1996). This p oduc i i y ocus o compe i i eness, is mainly due o a gene al consensus ha a na ion’s capaci y o enhance li ing s anda ds is in insically linked o he e icien u iliza ion o i s esou ces, encompassing human, capi al, and na u al asse s. In spi e o his, we mus also men ion how Paul K ugman (1994) amously acknowledged he di ec di e ences be ween na ional and i m-le el compe i i eness, a guing ha na ions o coun ies, unlike i ms, do no ypically cease o exis due o compe i i e p essu es and “go ou o business”. Ne e heless, he concep o compe i i eness gains laye s o complexi y and becomes inhe en ly mul idimensional when he analy ical lens shi s om he na ional o he egional le el. Regional compe i i eness ope a es dis inc ly om a simple i m-le el agg ega ion (mic oeconomic) and a scaled down coun y-le el (mac oeconomic) compe i i eness (Ga dine e al., 2004), es ablishing i sel as a signi ican in e media e, o meso-economic, laye . A equen ly ci ed de ini ion o egional compe i i eness was he one de eloped by Meye -S ame (2008), which desc ibes sys emic compe i i eness as “ he abili y o a locali y o egion o gene a e high and ising incomes and imp o e he li elihoods o he people li ing he e”. This de ini ion places egional p ospe i y ex emely close o compe i i eness, hus b oadening i s scope beyond me e p oduc i i y aking in o accoun o he c ucial aspec s such as “sus ainable g ow h” and i s capaci y o “enhance o e all s anda ds o li ing” (B is ow, 2005; Huggins, 2003). To isualize he mul i ace ed na u e o compe i i eness ac oss di e en le els, Figu e 1 ( om Meye -S ame , 2008, p. 3) illus a es he di e se concep s i encompasses. 7 Figu e 1. De e minan s o compe i i eness a di e en le els. [Sou ce: Meye -S ame , 2008] Gi en ha his s udy ocuses on Eu opean egions, he de ini ion de eloped by Dijks a e al. (2011) p o ides a pa icula ly ele an amewo k. They de ine egional compe i i eness as “ he abili y o a egion o o e an a ac i e and sus ainable en i onmen o i ms and esiden s o li e and wo k.” This de ini ion highligh s he key ole o bo h economic and social ac o s, encompassing quali y o li e, ins i u ional obus ness, and long- e m sus ainabili y, while mo ing beyond he simple ocus on a egion’s economic pe o mance. On he one hand, his de ini ion aligns wi h he inc easing c i icism ha he adi ional app oach o compe i i eness has aced. Fo ins ance, Aiginge (2006) p oposed an al e na i e model whe e compe i i eness could ac i ely con ibu e o social wel a e, inco po a ing posi i e ex e nali ies like quali y o li e and social cohesion. In subsequen wo k, Aiginge & Vogel (2015) ein o ced his in eg a ed pe spec i e, a guing ha compe i i eness should no be a goal bu a means o ob ain goals o inclusi e and sus ainable g ow h, ul ima ely enhancing he well-being o ci izens. On he o he hand, his mo e comp ehensi e iew is also inc easingly e lec ed in Eu opean Union policy documen s and a ious egional s udies. As an example, Camagni (2002) in oduced he concep o “ e i o ial compe i i eness”, emphasizing he signi ican ole o ac o s such as inno a ion ne wo ks, local go e nance s uc u es, and spa ial quali y. Simila ly, Annoni & Dijks a (2019) ha e ecen ly demons a ed he subs an ial impac o non-economic dimensions (including educa ion le els, in as uc u e de elopmen , and e en digi al accessibili y) on egional pe o mance ac oss Eu ope. All in all, hese e ol ing de ini ions collec i ely highligh a g owing consensus du ing he las decades: compe i i eness is no solely abou maximizing p oduc ion o accele a ing ou pu , bu a he abou achie ing hese goals in ways ha a e socially inclusi e, 8 en i onmen ally esponsible, and held up by s able ins i u ional amewo ks. A uly compe i i e egion is one whe e businesses can lou ish, bu equally impo an ly, whe e indi iduals a e a ac ed o li e, wo k, and in es in hei u u e. The compe i i eness concep adop ed o he sake o his esea ch alls wi hin his b oad, in eg a ed app oach. I di e s om he p ocedu es and de ini ions examining egions as small coun ies o collec i e en e p ises compe ing solely on cos s, expo da a o b u e p oduc i i y. I adhe es o an agenda whe eby inno a ion, sus ainabili y, and long- e m e i o ial g ow h a e conside ed o be he essen ial ounda ions o egional p ospe i y and compe i i eness. Such a holis ic de ini ion is pa icula ly ele an in compa ing egions such as he Basque Coun y and Baden-Wü embe g, which ha e bo h pu sued compe i i eness s a egies ha go beyond adi ional economic me ics. 2.2. Regional Benchma king: Founda ions, Types and Limi a ions Regional benchma king, simila o he a o emen ioned idea o compe i i eness, owes i s o igin o me hods concei ed in he business wo ld. I is he sys ema ic compa ison be ween egions (simila o companies in business benchma king) wi h he in en ion o acqui ing good p ac ices and o s ee s a egies owa ds enhancing egional pe o mance (Lund all & Tomlinson, 2001). Al hough he e is no s anda d de ini ion, egional benchma king has been de ined as a sys ema ic compa a i e lea ning app oach ha enables policy o mula ion and egional de elopmen (Huggins, 2008). By quan i ying hei compa a i e posi ion o e impo an dimensions—such as inno a ion, p oduc i i y, ins i u ional quali y, o indus ial de elopmen — egions a e able o mo e ully unde s and hei weaknesses and s eng hs (OECD, 2005) and use his in o ma ion when planning u u e policies (Na a o e al., 2011). Essen ially, he p ac ice is unde pinned by he assump ion ha o he people's expe ience can be used o lea n lessons, especially hose ha a e doing be e in ma e s o conce n. As Papaioannou e al. (2006) emphasize, lea ning om o he s acili a es he ealiza ion o s a egic gaps and o mula ing con ex -speci ic eac ions. Impo an ly, benchma king canno be limi ed o nume ical compa isons; i mus ake in o accoun he ins i u ional, policy, and socio-economic se ings ha suppo pe o mance di e ences (Huggins e al., 2013). Among he mos signi ican me hodological ounda ions o success ul benchma king is he compa abili y p inciple. As a gued by Papaioannou e al. (2006), compa ison is mos e ec i e when i in ol es egions ha sha e simila challenges o s uc u al cha ac e is ics, in di e en dimensions whe he i is indus ial composi ion, ins i u ional amewo k, economic scale o simila e i o ies. Tha said, o he schola s (Balza , 2006) a gue ha unde ce ain condi ions, egions can also lea n om hose wi h con as ing cha ac e is ics, p o ided ha he di e ences a e well con ex ualised and in e p e ed ca e ully. Benchma king is adi ionally oo ed in quan i a i e esea ch, ounded on indica o s and ankings o ela i e pe o mance compa ison. Fo complex and mul idimensional phenomena like egional compe i i eness, howe e , his app oach alone is no su icien . Mos specialis s ag ee now ha a heal hy exe cise in benchma king mus ind a balance 9 3.2. Uni o Te i o ial Analysis: Conside a ions o NUTS 1 s. NUTS 2 Le els A cen al me hodological decision o his egional compa ison is o choose he app op ia e e i o ial uni o analysis. Acco ding o he Eu opean Union's s anda dized classi ica ion sys em (NUTS), es ablished unde Regula ion (EC) No. 1059/2003, egions a e ypically analysed a he NUTS 2 le el. In mos Eu opean coun ies, his le el co esponds o he adminis a i e egions esponsible o egional go e nance and policy. Howe e , excep ions exis , no ably in Ge many, he Uni ed Kingdom, and Belgium, whe e egional policy compe ences a e si ua ed a he NUTS 1 le el. In Ge many’s case, he ede al s a es (Lände ) o m he p ima y uni s o egional go e nance (Na a o e al., 2011). Consequen ly, ollowing he me hodological app oach adop ed in he “Indicado es de inno ación y benchma king” (Na a o e al., 2011) and he Regional Inno a ion Moni o (Walendowski e al., 2011), his s udy will use NUTS 2 o he Basque Coun y and NUTS 1 o Baden-Wü embe g. This poses a me hodological challenge, as he RCI 2.0 (Regional Compe i i eness Index) p o ides da a only a he NUTS 2 le el. As a esul , he analysis o Baden-Wü embe g equi es agg ega ing he da a om i s ou cons i uen NUTS 2 egions: S u ga , Ka ls uhe, Tübingen, and F eibu g. To es ablish a compa able benchma k wi h he Basque Coun y, we will calcula e he a i hme ic mean o hese ou sub egions, which will o e a gene al o e iew o he egion’s compe i i e pe o mance. Howe e , o accoun o po en ial in e nal a ia ion and iden i y any di e gen pa e ns, we will also examine he indi idual sco es o each sub egion. This complemen a y analysis will help de e mine whe he he ou sub egions ollow simila ends o i speci ic a eas s and ou in ways ha could be analy ically ele an . 3.3. Da a Sou ces and Va iables: Analysis o he Regional Compe i i eness Index (RCI 2.0) 2016, 2019, and 2022 The quan i a i e da a in his s udy will be de i ed om he mos ecen and i h edi ion o he Eu opean Regional Compe i i eness Index (RCI) (Dijks a e al., 2023). This la es RCI epo b eaks down ecen igu es and ecalcula es numbe s using he new RCI 2.0 indica o o he yea s 2016, 2019, and 2022. Wi h he choice o hese h ee poin s in ime, he examina ion will p o ide a consis en and compa able me hod o analyze he Basque Coun y and Baden-Wü embe g's compe i i e pe o mance o e ecen yea s. Selec ion o such a ime pe iod is necessa y due o he a ailabili y o ha monized and e-calib a ed indica o s, hus ensu ing ha c oss- egion compa isons a e obus and eliable. In addi ion o he RCI 2.0 da ase , his p ojec will also u ilize wo o he quan i a i e da a sou ces ha will p o ide complemen a y e idence. Fi s , he his o ical egional GDP and popula ion da a om Roses and Wol (2020) will be used o b ie ly summa ize he long e m economic pa hs o he wo egions o he 20 h cen u y based on hei ela i e posi ion. The GDP da ase will no only be used o his pu pose, bu we will also ex ac da a speci ic o 16 sec o al employmen —in pa icula , he pe cen age o employmen in indus y. This da ase will p o ide con ex o he weigh and e olu ion o indus ial ac i i y wi hin each egion, while p o iding a obus e idence base o ein o ce ou in e p e a ion o s uc u al change p ocesses o e ime. Inno a ion capaci y will also be assessed using he Regional Inno a ion Sco eboa d 2023, which p o ides upda ed indica o s o egional inno a ion pe o mance and classi ica ion wi hin he Eu opean Union (la es a ailable da a). The addi ional da ase s will be pa icula ly ele an o he con ex ual o e iew in sec ion 4.1, while also con ibu ing o u he suppo o ou compa a i e analysis p esen ed in he ollowing sec ions. 3.4. Complemen a y Quali a i e Da a and Analysis In o de o complemen hese quan i a i e indings, his esea ch will inco po a e a quali a i e analysis based on a a ie y o sou ces, including academic li e a u e, his o ical epo s and policy documen s ha ace majo de elopmen s and policy ini ia i es in bo h he Basque Coun y and Baden-Wü embe g. This quali a i e dimension will allow o a deepe unde s anding o he b oade his o ical and s uc u al dynamics ha ha e shaped each egion’s compe i i eness o e ime. While he quan i a i e analysis will pu g ea e ocus on he pe iod 2016–2022, he quali a i e s udy will ace he e olu ion o indus ial ends and policy en i onmen s o e he pas decades. This b oade his o ical scope is equi ed o accoun o long- e m shi s and o pu con empo a y compe i i e posi ioning o each egion in o pe spec i e. In pa icula , he analysis will conside he Basque Coun y's indus ial change, emphasizing key ends, impo an ans o ma ions, and long-s anding challenges ha ha e cha ac e ized i s economic ajec o y. Simila ly, a compa a i e analysis will be conduc ed o Baden-Wü embe g, wi h pa icula emphasis on he d i e s o success and adap a ion mechanisms ha ha e encou aged i s sus ained indus ial compe i i eness. Fu he mo e, he s udy will p o ide a compa a i e analysis o he s uc u al, ins i u ional, and socioeconomic ac o s ha di e en ia e o liken he wo egions, wi h a pe spec i e o be e unde s anding he con ex ual de e minan s o hei compa a i e pe o mances. This will be complemen ed by an o e iew o key policies and ac ions implemen ed in bo h egions o build indus ial compe i i eness, including policies o s imula e inno a ion, indus ial mode niza ion, and in e na ionaliza ion. On he whole, he quali a i e analysis will a emp o ex ac po en ial policy lessons o he Basque Coun y om he expe ience o Baden-Wü embe g. Ra he han sugges ing di ec eplica ion, he goal will be o iden i y s a egic implica ions and bes p ac ices ha could in o m u u e egional de elopmen s a egies, aking in o accoun he speci ic cha ac e is ics and capaci ies o he Basque con ex . By combining his long- e m quali a i e pe spec i e wi h ecen quan i a i e analysis, he s udy seeks o o e a comp ehensi e unde s anding o egional compe i i eness dynamics, b idging he his o ical oo s o indus ial ans o ma ion wi h con empo a y pe o mance ou comes. 17 3.5. Me hodological Limi a ions and Challenges Like all compa a i e egional s udies, his analysis is ine i ably con on ed wi h ce ain me hodological limi a ions which mus be acknowledged. Needless o say, i will no be easible o ea all policies, o ganisa ional e o ms, and compe i i eness indica o s o he Basque Coun y and Baden-Wü embe g. Thus, he analysis shall con ain some o e simpli ica ion by na u e, including p ominen ends and impo an policy s eps bu no a emp ing o pe o m an exhaus i e analysis o all possible in luences. Benchma king exe cises hemsel es a e ex emely complex, especially in he case o compa ing egions ha , hough s uc u ally e y simila in many ways, emain dissimila in signi ican espec s. Though he Basque Coun y and Baden-Wü embe g we e chosen by accep ed p ocedu es o de e mining compa able egions (Na a o e al., 2011), economic size, ins i u ional a angemen s, and poli ical ci cums ances ine i ably shape bo h hei expe iences and he applicabili y o pa icula policy lessons. Such con ex ual a ia ion ensu es ha indings ha e o be ea ed cau iously and subjec o ai ly sub le compa isons. The use o he Regional Compe i i eness Index (RCI) 2.0 as he main quan i a i e ool also has some limi a ions. Al hough he RCI 2.0 o e s a aluable, s anda dized ool o assessing egional compe i i eness, i s applica ion o agg ega ed indica o s may ac ually smoo h o e conside able in e nal dispa i ies wi hin egions. This is especially he case o Baden-Wü embe g, whe e he analysis is based on he a e age o i s ou NUTS 2 egions—po en ially masking di e ences in economic pe o mance o policy impac s ac oss di e en sub egional egions. Also, while he quan i a i e da a ocus on he yea s 2016, 2019, and 2022, he quali a i e analysis looks u he a ield o ch onicle he longe - un indus ial and ins i u ional e olu ion o each egion. This is an asymme y in ime ho izons be ween he wo me hods ha may p o oke ension when syn hesizing indings, bu also deepens he analysis by p o iding a iche unde s anding o his o ical ajec o ies behind cu en compe i i eness ou comes. On he whole, despi e hese cons ain s, in eg a ing quan i a i e and quali a i e me hods p o ides a iche and mo e de ailed pic u e han ei he could indi idually. Acknowledging he limi s o his esea ch pe mi s a mo e conse a i e and c i ical eading o he esul s, while also allowing subsequen esea ch o add o and e ine he indings de eloped in his wo k. 4. Compa a i e Analysis o Regional Compe i i eness 4.1. O e iew o Economic De elopmen T ajec o ies and Cu en Posi ion o he Basque Coun y and Baden-Wü embe g Be o e engaging in a compa a i e analysis o compe i i eness s a egies, i is use ul o ou line he b oad economic ajec o ies o he Basque Coun y and Baden-Wü embe g o e he 20 h cen u y, as well as hei cu en economic and inno a ion s anding wi hin he Eu opean landscape. 18 The long- e m da a compiled by Roses and Wol (2020) on GDP, popula ion and employmen sha e o indus y ac oss Eu opean egions om 1900 o 2015 p o ides a use ul pe spec i e. Baden-Wü embe g consis en ly s ood among he mos p ospe ous and indus ialised egions in Eu ope h oughou he 20 h cen u y. I s economy bene i ed ea ly om Ge many’s s ong manu ac u ing base and in eg a ion in o global ma ke s. In con as , he Basque Coun y, while also highly indus ialised by Spanish s anda ds, ollowed a mo e une en pa h, ma ked by pe iods o s agna ion and lowe g ow h du ing F anco's dic a o ship, and a as e g ow h a e he 1990s. Figu e 3. E olu ion o egional GDP pc [Sou ce: Roses-Wol da abase, 2020] Looking a cu en indica o s (G aph 1), bo h egions display obus economic p o iles, albei wi h no able di e ences. In e ms o GDP pe capi a (adjus ed o pu chasing powe ), he Basque Coun y emained ahead o Baden-Wü embe g un il a ound 1937. F om ha poin , Ge many began o g ow mo e apidly, and a e 1950 Baden-Wü embe g expe ienced much as e economic expansion, main aining a highe le el han he Basque Coun y up o he p esen . This e lec s i s ad anced indus ial ecosys em and expo -o ien ed model. 19 Figu e 4. Sha e o Indus y and Mining in To al Employmen . [Sou ce: Roses-Wol da abase, 2020] Rega ding he pe cen age o employmen in indus y (G aph 2), bo h egions show a simila end, wi h a s eady inc ease un il 1980, ollowed by a signi ican decline o e he subsequen decades. In e ms o inno a ion capaci y, he 2023 edi ion o he Regional Inno a ion Sco eboa d classi ies all ou NUTS-2 egions o Baden-Wü embe g as ei he "Leade " o "S ong +" inno a o s, wi h Ka ls uhe achie ing one o he highes sco es in he EU (142.4, anked 7 h) (Eu opean Commission, 2023). The Basque Coun y, meanwhile, is ca ego ised as a “S ong Inno a o ” wi h a sco e o 109.8, placing i in he uppe hal o EU egions (72nd). While his e lec s a solid inno a ion in as uc u e, i also highligh s a compe i i e gap wi h he leading inno a ion egions in Sou he n and Cen al Eu ope (Eu opean Commission, 2023). Table 2. Key Economic and Inno a ion Indica o s 2023 Uni Baden Wu embe g Basque Coun y GDP pc EUR 54 339 39.547 Popula ion 1000 11 339 2.196 Inno a ion Index RII Punc ua ion 131,1 109,8 R&D: Expense/GDP % GDP 5,6 2,16 [Sou ce: Eus a , Minis y o Economic A ai s, Labou and Tou ism o Baden-Wü embe g, Eu opean Commission] As Table 2 clea ly shows, Baden-Wü embe g main ains a signi ican lead in GDP pe capi a, e lec ing i s highly p oduc i e and expo -o ien ed economy, e en wi h a much la ge popula ion. The egion also demons a es a conside ably highe Inno a ion Index sco e and a 20 no ably la ge R&D expendi u e as a pe cen age o GDP. This s ong commi men o esea ch and de elopmen unde sco es i s posi ion as a global inno a ion leade . While he Basque Coun y shows obus igu es, pa icula ly in i s GDP pe capi a o i s size, and a solid Inno a ion Index ha places i as a "S ong Inno a o ," hese cu en da a poin s con i m he compe i i e gap wi h Baden-Wü embe g, pa icula ly in he in ensi y o i s inno a ion ecosys em and i s economic ou pu pe pe son. These dispa i ies in bo h his o ical de elopmen and cu en pe o mance a e impo an o keep in mind when assessing he ins i u ional amewo ks, indus ial policies, and inno a ion s a egies o he wo egions in he sec ions ha ollow. 4.2. E olu ion and Compa ison o he O e all RCI Sco es: Basque Coun y and Baden-Wü embe g (2016-2022) The e olu ion o he Regional Compe i i eness Index (RCI) sco es be ween 2016 and 2022 o e s aluable insigh s in o he compa a i e dynamics be ween he Basque Coun y and Baden-Wü embe g. Al hough bo h egions consis en ly demons a e s ong compe i i eness wi hin he Eu opean amewo k, hei ajec o ies o e he pas yea s e eal meaning ul pa e ns ha me i de ailed e lec ion. In 2016, Baden-Wü embe g displayed an excep ional o e all RCI sco e o 136.4, signi ican ly su passing he Basque Coun y's sco e o 102.7. This ini ial gap o o e 33 poin s e lec ed he s uc u al ad an ages o he Ge man egion, adi ionally ecognized o i s s ong indus ial base, wo ld-class inno a ion ecosys em, and highly de eloped in as uc u e. O e he ollowing yea s, howe e , an in e es ing end un olded. By 2019, Baden-Wü embe g's o e all sco e dec eased sligh ly o 127.6, and hen u he o 120.0 in 2022. Meanwhile, he Basque Coun y exhibi ed a ela i ely s eady upwa d p og ession: i s RCI sco e dec eased om 104.9 in 2016 o 102.7 in 2019, and ul ima ely ose o 107.0 in 2022. This dynamic is isually summa ized in Figu e 5 below, whe e we obse e wo key phenomena: a mode a e decline in Baden-Wü embe g's sco es, and a g adual imp o emen in hose o he Basque Coun y. 21 Figu e 5. EU Regional Compe i i eness Index 2.0 -2022 edi ion o BW and PV Sco es (2016–2022) [Sou ce: Own elabo a ion based on Eu opean Commission RCI 2022 Repo ] While he Basque Coun y’s absolu e sco e emains lowe in compa ison, he end owa d con e gence is clea . The gap be ween he wo egions na owed om 33.7 poin s in 2016 o jus 13 poin s in 2022. Impo an ly, his con e gence does no eme ge om an ex ao dina y leap in Basque compe i i eness, bu a he om a combina ion o mode a e Basque imp o emen and ela i e decline o s abiliza ion a e y high le els by Baden-Wü embe g. Se e al ac o s may explain hese de elopmen s. Fo Baden-Wü embe g, s uc u al sa u a ion could pa ly accoun o he sligh down u n. Being al eady one o Eu ope’s mos compe i i e egions, ma ginal imp o emen s become inc easingly di icul ("diminishing e u ns" e ec ). Mo eo e , ex e nal shocks (such as he COVID-19 pandemic and dis up ions in global supply chains) may ha e disp opo iona ely impac ed highly indus ialized expo -d i en economies like Baden-Wü embe g. Con e sely, he Basque Coun y appea s o ha e bene i ed om s eady, hough modes , enhancemen s ac oss key a eas o compe i i eness. Imp o emen s in labou ma ke e iciency, educa ion, and inno a ion capaci y, combined wi h a esilien indus ial sec o , likely con ibu ed o his posi i e e olu ion. Addi ionally, a ge ed egional policies aligned wi h he Sma Specialisa ion S a egy (RIS3 Euskadi) may ha e g adually ein o ced s uc u al s eng hs o e his pe iod. 22 Howe e , i is c ucial o in e p e hese esul s ca e ully, o a oid d awing ea ly conclusions. Despi e he na owing gap, Baden-Wü embe g s ill main ains a clea compe i i e edge. I s sco e, al hough sligh ly lowe han in p e ious yea s, emains subs an ially highe han he EU a e age and e lec s p o ound s uc u al ad an ages ha a e no easily e oded. The Basque Coun y's ca ching-up is encou aging, bu i does no imply pa i y; signi ican di e ences emain in dimensions such as ma ke size and inno a ion in ensi y, as will be analysed in subsequen sec ions. Thus, i can be concluded ha om 2016 o 2022 we encoun e a scena io o ela i e con e gence, d i en by he s abiliza ion o a op pe o me and he g adual imp o emen o a mid- ie egion. These di e en dynamics highligh he complexi y o benchma king exe cises: i is no only he absolu e sco es ha ma e , bu also he unde lying ajec o ies, con ex s, and s uc u al eali ies shaping egional compe i i eness o e ime. 4.3. Compa a i e Analysis o he 11 RCI Sub-indices: Iden i ying S eng hs and Weaknesses To complemen he analysis o he o e all RCI sco es, i is essen ial o examine he ele en sub-indices ha decompose egional compe i i eness in a mo e de ailed and g anula way. These dimensions allow us o be e unde s and he speci ic a eas whe e each egion excels o encoun e s g ea e challenges. Fo his pu pose, he ollowing able summa izes he pe o mance o Baden-Wü embe g and he Basque Coun y in each sub-index o he yea s 2016, 2019, and 2022. Addi ionally, Figu e 6 p o ides a isual compa ison o he 2022 sco es o each o he ou NUTS-2 egions o Baden-Wü embe g, he Basque Coun y, and he EU a e age, allowing o a mo e in ui i e unde s anding o hei ela i e posi ions. Table 3. E olu ion o RCI 2.0 11 pilla s sco e (2016–2022) Pila Baden-Wü embe g 2022 País Vasco 2022 Baden-Wü embe g 2019 País Vasco 2019 Baden-W ü embe g 2016 País Vasco 2016 RCI 2.0 O e all 120.0 107.0 127.6 104.9 136.4 102.7 Basic Sub-index 118.7 103.4 126.1 98.6 133.1 92.8 Ins i u ions Pilla 125.4 115.7 142.6 108.1 142.8 95.8 Mac oeconomic S abili y Pilla 136.7 78.1 143.7 71.9 147.5 66.8 In as uc u e Pilla 113.9 115.6 117.9 95.6 158.9 39.6 Heal h Pilla 110.4 117.2 111.6 118.2 114.6 119.5 23 Basic Educa ion Pilla 110.4 92.5 117.2 95.1 121.6 108.0 E iciency Sub-Index 124.7 105.6 127.4 104.6 135.3 117.5 Highe Educa ion and LLL Pilla 104.3 126.9 110.4 123.8 116.4 149.0 Labou Ma ke E iciency Pilla 124.1 95.3 121.4 89.2 132.1 101.7 Ma ke Size Pilla 162.6 89.4 164.5 102.3 166.0 103.5 Inno a ion Sub-Index 117.0 117.1 133.2 105.8 141.8 106.3 Technological Readiness Pilla 105.7 135.2 136.2 105.5 141.8 105.2 Business Sophis ica ion Pilla 101.6 93.0 120.3 88.3 108.5 102.3 Inno a ion Pilla 148.0 118.8 142.0 123.4 180.1 112.9 Sou ce: Own elabo a ion based on Eu opean Commission RCI 2022 Repo . A de ailed examina ion o he sub-index da a om 2016 o 2022 e eals clea and pe sis en pa e ns be ween Baden-Wü embe g and he Basque Coun y, as well as some in e es ing shi s o e ime. Looking in o Ins i u ions, Baden-Wü embe g s ill leads, bu i s sco e has d opped signi ican ly ( om 142.8 in 2016 o 125.4 in 2022) sugges ing g owing go e nance challenges. In con as , he Basque Coun y shows imp o emen , ising om 95.8 o 115.7, which may e lec ins i u ional consolida ion a he egional le el. Mac oeconomic S abili y emains one o he mos s uc u al di isions be ween he wo egions. Baden-Wü embe g anks ex emely well in his dimension h oughou , om 147.5 in 2016 o 136.7 in 2022, e lec ing Ge many's classic mac oeconomic s eng h, iscal conse a ism, and c edibili y. In con as , he Basque Coun y anks signi ican ly lowe , unde 80 in all h ee yea s— om 66.8 in 2016 o 78.1 in 2022. This gap does no , howe e , e lec unde pe o mance a he egional le el. The RCI calcula es mac oeconomic a iables based on na ional da a, he e o e, he Basque Coun y "inhe i s" he o e all mac oeconomic ins abili y o Spain, which has his o ically su e ed om highe deb , highe budge de ici s, and g ea e in la iona y p essu es. Baden-Wü embe g, in con as , bene i s om he o e all mac oeconomic heal h o Ge many. This indica es one o he inhe en limi a ions o subna ional benchma king: ce ain pilla s a e subjec o na ional in luences ha a e no unde he immedia e con ol o subna ional go e nmen s, which in oduces dis o ions when compe i i eness is ead ac oss a he subna ional le el. 24 The In as uc u e Pilla b ings a su p ising and in e es ing e e sal be ween he wo egions. While Baden-Wü embe g enjoyed a b oad ma gin in 2016, when i egis e ed 158.9, i s sco e has allen s eadily h oughou he yea s o 113.9 in 2022. The Basque Coun y, on he o he hand, has p og essed s eadily, om 39.6 in 2016 o 115.6 in 2022, and consequen ly su passed i s Ge man compe i o in he la es yea . This end can possibly e lec ecen egional in es men in p io i y in as uc u e a eas such as sus ainable mobili y, ene gy e iciency, and digi al connec i i y. I is also likely ha EU cohesion unding and local de elopmen s a egies (including "sma ci y" ini ia i es and he consolida ion o ail and po ne wo ks) ha e had an impac in his ega d. Con e sely, Baden-Wü embe g’s decline may be due o ageing in as uc u e o insu icien ein es men , he e o e a ec ing egional logis ics and long- e m p oduc i i y. Rega ding he Heal h Pilla , he Basque Coun y ou pe o ms consis en ly, sco ing abo e 117 in e e y yea , while Baden-Wü embe g emains s able bu lowe , a ound 110. This e lec s he Basque egion’s adi ionally s ong public heal h sys em and wel a e o ien a ion. Fo Basic Educa ion, he end is e e sed. Baden-Wü embe g has emained abo e 110 ac oss all h ee yea s, while he Basque Coun y shows i egula pe o mance—peaking a 108.0 in 2016 bu alling again o 92.5 in 2022. The E iciency Sub-index, combining Highe Educa ion, Labou Ma ke E iciency, and Ma ke Size, again shows Baden-Wü embe g in he lead, hough i declined om 135.3 in 2016 o 124.7 in 2022. The Basque Coun y's sco e d opped om 117.5 in 2016 o 105.6 in 2022, indica ing inc easing di e gence. Wi hin he Highe Educa ion and Li elong Lea ning Pilla , he Basque Coun y consis en ly bea s Baden-Wü embe g and s ands as a Eu opean leade . Wi h a ema kable peak o 149.0 in 2016 and s ill main aining 126.9 in 2022, Euskadi clea ly excels in human capi al building. These esul s indica e a s able and well-o ganized oca ional educa ion and aining (VET) sys em, consis ency o suppo o li elong lea ning, and ac i e in e ac ion be ween educa ion p o ide s and he local indus y. The p ac icabili y o his app oach has been s ongly a gued in esea ch li e a u e and by global ins i u ions such as he OECD. Baden-Wü embe g, while s ill doing ai ly well (be ween 104 and 116), is lagging in his ega d. This migh seem pa adoxical as he egion demons a es g ea compe i i eness in o he dimensions like indus ial inno a ion. In his case, his shows ha he Basque model o skills o ma ion based on coo dina ion and e i o ial s a egy is showing eal compe i i e payo s. Labou Ma ke E iciency, howe e , ells a di e en s o y. Baden-Wü embe g has main ained high pe o mance (124.1 in 2022), while he Basque Coun y has s uggled, d opping om 101.7 in 2016 o 95.3 in 2022. The empo a y peak in 2016 may ha e been ela ed o pos -c isis employmen eco e y, bu he la es igu es sugges linge ing igidi ies o misma ches in he labou ma ke . Ma ke Size con inues o be an ongoing s uc u al cons ain o he Basque Coun y. O e all h ee yea s, he egion is below 105, alling om 103.5 in 2016 o 89.4 in 2022. 25 equi y, en i onmen al sus ainabili y, and ecip ocal p ospe i y (Gobie no Vasco, 2019). I ins alls a e i o ial de elopmen logic whe ein he economic pe o mance elies upon go e nance quali y, lea ning ins i u ions, and social in ol emen . This is he u u e ha is buil on he ins i u ional pilla s, e alua ion quali y, and coope a i e e hos cul i a ed o e he pas decade. As he egion ansi ions in o an e a o en i onmen al change, echnological uphea al, and demog aphic p essu e, i s abili y o change will be as much a unc ion o p uden policy as i will be o s aying g ounded in a common sense o pu pose o co-c ea ing a s ong, inclusi e, and inno a ion-d i en u u e. 5.2. Indus ial E olu ion in Baden-Wü embe g: Key T ends, T ans o ma ions, and Success Fac o s In con as o he Basque Coun y’s expe ience o ab up s uc u al ans o ma ion du ing he la e 20 h cen u y, Baden-Wü embe g has ollowed a mo e s able and pa h-dependen ajec o y since he pos -Wo ld Wa II pe iod. As one o Ge many’s weal hies and mos indus ialised egions, i bene i ed ea ly on om he eme gence o a dense ne wo k o small and medium-sized en e p ises (SMEs)— he enowned Mi els and—suppo ed by s ong oca ional educa ion sys ems and a his o ically close alignmen be ween indus y, public policy, and applied esea ch ins i u ions (Heiden eich, 2004). This p oduc ion model has allowed he egion o main ain global compe i i eness h ough inc emen al inno a ion a he han dis up i e o e hauls (Heinze & Schmid, 1996). The economic s uc u e o Baden-Wü embe g con inues o ely hea ily on a highly di e si ied and expo -o ien ed manu ac u ing base, cha ac e ised by echnological sophis ica ion, deep sec o al specialisa ion, and embeddedness in global alue chains (Cooke, 2001; Eh ha d & Nowak, 2011). Majo indus ial playe s such as Daimle , Bosch, and SAP coexis wi h housands o highly specialised SMEs, many o which domina e global niche ma ke s and p io i ise long- e m s a egy, p oduc quali y, and con inuous inno a ion (Ge many Wo ks, 2023). These i ms ope a e wi hin dense egional ecosys ems, whe e collabo a ion wi h uni e si ies, esea ch cen es, and public agencies is bo h ou ine and ins i u ionalised—a dis inc i e ea u e o wha schola s ha e e med he egion’s “inno a ion egime” (Heiden eich, 2004). This collabo a i e ab ic is u he ein o ced by he s a e’s longs anding commi men o clus e policies. Since he ea ly 2000s, Baden-Wü embe g has ac i ely p omo ed he de elopmen o s a egic clus e s in ields such as mobili y, medical echnology, mic oelec onics, and en i onmen al inno a ion. These ini ia i es a e no jus sec o al concen a ions bu pla o ms o coo dina ed ac ion be ween i ms, esea ch ins i u ions, and public ac o s (Baden-Wü embe g Minis y o Economic A ai s, 2024). The RegioClus e Agen u exempli ies his coo dina ed app oach, ac ing as an in e media y o s eng hen inno a ion po en ial, os e c oss-sec o al lea ning, and ensu e he s a egic cohe ence o egional e o s (In e eg Eu ope, 2024). 32 In ecen yea s, he egion has also posi ioned i sel as a pionee in he de elopmen o Indus y 4.0. Th ough he “Wi scha 4.0 Baden-Wü embe g” s a egy and ins i u ions such as Allianz Indus ie 4.0, he s a e has p o ided dedica ed suppo o SMEs o adop digi al echnologies—o e ing consul ancy se ices, unding, and aining p og ammes (Indus ie 4.0 BW, 2023). These policies e lec a sys emic app oach ha in eg a es echnology adop ion wi h b oade ans o ma ion in skills, o ganisa ional models, and in e - i m coope a ion. A majo pilla o his model is he esea ch and alen in as uc u e, which includes wo ld-class uni e si ies, applied science ins i u ions, and in e na ionally ecognised esea ch o ganisa ions such as F aunho e , Max Planck, and Helmhol z. Thei wo k is closely aligned wi h indus y needs and s a egically coo dina ed h ough pla o ms like he Inno a ionsallianz Baden-Wü embe g (innBW, 2023). Flagship p ojec s such as Cybe Valley—a globally leading AI esea ch clus e —ha e u he ein o ced he egion’s capaci y o ansla e scien i ic excellence in o indus ial ad an age. Unde pinning all o his is a dis inc i e go e nance model ha combines long- e m s a egic di ec ion wi h s ong local ancho ing. The s a e go e nmen , while p o iding mac o-le el leade ship, collabo a es closely wi h local au ho i ies, chambe s o comme ce, and indus y associa ions in a o m o meso-co po a is coo dina ion (Heinze & Schmid, 1996). Inno a ion go e nance is hus dis ibu ed ac oss public, p i a e, and academic sec o s, enabling lexible and esponsi e policymaking capable o add essing s uc u al challenges and ex e nal shocks—as demons a ed in esponses o he COVID-19 pandemic and ongoing ene gy unce ain ies. Ul ima ely, Baden-Wü embe g’s indus ial esilience is oo ed in a combina ion o ac o s: a di e si ied SME base embedded in expo ma ke s; sus ained in es men in esea ch and de elopmen consis en ly exceeding 5% o egional GDP acco ding o Expänd (2025); dense inno a ion and educa ional ne wo ks; and a go e nance sys em ha ensu es policy con inui y and inclusi eness. Howe e , his model also aces moun ing p essu es. The egion mus now con on he challenge o deca bonising i s indus ial base, accele a ing digi alisa ion in adi ional sec o s, and add essing a g owing skills sho age—all wi hin an inc easingly ola ile global en i onmen . In esponse, Baden-Wü embe g has begun o shi emphasis owa d ene gy ansi ion, li elong lea ning, and sus ainabili y-d i en inno a ion, while ein o cing i s collabo a i e and ecosys em-based app oach o economic de elopmen (The LÄND, 2023). These e ol ing p io i ies e lec he egion’s con inued e o o emain compe i i e while na iga ing he complexi ies o indus ial ans o ma ion. 5.3. Iden i ica ion o Po en ial Lessons o he Basque Coun y om he Baden-Wü embe g Expe ience While he Basque Coun y and Baden-Wü embe g di e signi ican ly in size, ins i u ional con ex , and his o ical de elopmen , he compa a i e analysis ca ied ou in his s udy inds a 33 numbe o policy p inciples and s a egic app oaches ha can be use ul lessons o he Basque egion. These lessons a e no mean o be accep ed unc i ically; a he , hey a e p esen ed as po en ial poin s o e lec ion, on he basis o he s uc u al con e gences and sha ed indus ial ambi ions o bo h egions. Imp o ing Knowledge T ans e and Applied Resea ch One o he mos de ining aspec s o Baden-Wü embe g's success has been i s abili y o ake scien i ic esea ch and make i indus ial inno a ion, no ably ia he F aunho e Socie y and he S einbeis Founda ion (Cooke, 2001). The o ganisa ions a e mas e s a c ossing he bounda y be ween academic esea ch and exploi a ion o p o i , pa icula ly o SMEs. While Basque Coun y does ha e an ad anced in as uc u e o applied esea ch h ough ins i u ions such as Tecnalia, IKERLAN, and IDEKO, he e may be oppo uni ies o pu sue u he he de elopmen o o malized, es ablished uni s ocused speci ically on apid echnology ans e and inno a ion suppo se ices o SMEs, a leas in less ad anced ma ke s o in pe iphe al egions. Expanding he Role o Dual Voca ional T aining Educa ion Ge many's dual VET sys em is widely ega ded o be one o he p ima y d i e s o i s indus ial migh . I gi es a eliable supply o echnically quali ied labo ia an a angemen which combines class oom educa ion wi h in-company aining. The Basque Coun y has made signi ican p og ess in e o ming i s oca ional aining sys em and coo dina ing i wi h he demands o indus y (Mujika & In xaus i, 2018). Ye he long-es ablished, well- oo ed VET sys em o Baden-Wü embe g can also su ely ha e use ul lessons o impa on how o b ing SMEs mo e ully in o aining ne wo ks and ad ance li elong lea ning in he ace o echnological and demog aphic change. Enhancing SME Engagemen in G een and Digi al T ansi ions Baden-Wü embe g has con inuously demons a ed p oac i e e o s o encou age SMEs o adop Indus y 4.0 echnology and mo e owa d sus ainabili y (such as wi h he "Wi scha 4.0" p og am). This app oach has been a i al cha ac e is ic o i s compe i i eness s a egy in he las ew yea s. Gi en he Basque Coun y's obus indus ial base and high sha e o SMEs, expanding cu en p og ams o suppo i ms o digi alize ope a ions, imp o e ene gy e iciency, and ad ance owa ds EU G een Deal goals migh be an e ec i e pa h. Lessons om Baden-Wü embe g's a ge ed ou each, especially o small i ms in legacy sec o s, migh in o m policy design and deli e y mechanisms in he Basque con ex . P io i ising Long-Te m, Adap i e Policy F amewo ks 34 Baden-Wü embe g’s success in econ igu ing indus ial policy wi hou losing long- e m s a egic con inui y is c ucial, and emphasizes he need o adap i e policy ames condi ioned by sha ed p io i ies and ins i u ionally embedded us . Indeed, he Basque Coun y's own changes in ecen decades, as illus a ed in RIS3 s a egy and i s mo e gene al model o inclusi e compe i i eness, ollowed simila p inciples. Ye  in an e e mo e unce ain and dynamic wo ld, he e is a clea equi emen o ake o wa d mo e sys ema ic me hodologies o con inuous lea ning, mul i ac o e alua ions and an icipa o y go e nance. S eng hening hese dimensions could help sa egua d he egion’s compe i i eness s a egy, building on he kind o long- e m esilience demons a ed by Baden-Wü embe g (A angu en e al., 2021; Mo gan e al., 2020). All in all, al hough i is no app op ia e o mechanically ans e Baden-Wü embe g’s ins i u ional and indus ial se -up, i s con inued ocus on long- e m policy coo dina ion, p omo ion o SMEs, de elopmen o he wo k o ce and applied inno a ion p o ides use ul inspi a ion. Fo he Basque Coun y, hese lessons se e mo e as inspi a ion han as a model o copy: an inspi a ion o s eng hen and ampli y exis ing compe ences, o s anda dize he eme ging ones and o in eg a e hem in a mo e e ec i e way in o a e i o ial s a egy di ec ed owa ds he u u e. 6. Conclusions 6.1. Summa y o Key Findings om he Compa a i e Analysis This esea ch has unde aken an ex ensi e benchma king analysis o he Basque Coun y and Baden-Wü embe g o explo e how wo s uc u ally simila Eu opean egions ha e add essed he challenge o sus aining indus ial compe i i eness in con as ing ins i u ional and his o ical con ex s. The s udy combined quan i a i e and quali a i e app oaches, ancho ed in he Eu opean Commission’s RCI 2.0 index, and examined con ex ual de elopmen s om he 1980s o he p esen day. The quan i a i e analysis encompassed GDP pc e olu ion and employmen sha e o indus y e olu ion o e he las cen u y, bu mainly ocused on he 2016, 2019, and 2022 RCI sco es, including bo h o e all compe i i eness and i s ele en sub-pilla s. These enabled a mul idimensional compa ison ac oss domains such as inno a ion, educa ion and aining, labou ma ke e iciency, echnological eadiness, in as uc u e, and ins i u ional quali y. Baden-Wü embe g consis en ly ou pe o med he Basque Coun y in mos indica o s—pa icula ly in inno a ion and echnological domains—showing con inui y and excellence in hese a eas. The Basque Coun y, while no ma ching hese le els, demons a ed solid pe o mance in a eas such as heal h, echnological eadiness, and educa ion, sugges ing a model ha is di e en ia ed a he han in e io . The quali a i e compa a i e analysis p o ided insigh s in o he ins i u ional, policy, and socioeconomic dynamics unde pinning hese sco es. Baden-Wü embe g ep esen s a pa adigma ic case o coo dina ed indus ial go e nance, cha ac e ised by long-s anding meso-co po a is ins i u ions, a s ong oca ional educa ion sys em, and highly e ec i e 35 inno a ion in e media ies such as he F aunho e and S einbeis ne wo ks. I s clus e policy is embedded in adi ions o coope a ion be ween indus y, go e nmen , and academia. In con as , he Basque Coun y unde wen a mo e ecen p ocess o ans o ma ion ollowing he indus ial c isis o he ea ly 1980s. Bene i ing om egional au onomy a e F anco's dic a o ship pe iod, he Basque Go e nmen led a long- e m s a egy ha combined clus e de elopmen , indus ial enewal, and ins i u ional inno a ion. The adop ion o he RIS3 app oach u he aligned esea ch, en ep eneu ship, and policy unde a sha ed s a egic amewo k. O e all, he compa a i e analysis shows ha egional compe i i eness eme ges om locally g ounded, pa h-dependen p ocesses. The Basque model, despi e i s smalle scale and mo e pe iphe al posi ion, demons a es adap i e capaci y and s a egic cohe ence, pa icula ly h ough inclusi e go e nance and he abili y o sus ain long- e m ision. The case o Baden-Wü embe g highligh s he impo ance o us -based coo dina ion, sus ained in es men in skills and inno a ion, and obus ins i u ional in as uc u e. Bo h cases ein o ce he idea ha compe i i eness is no only abou economic pe o mance bu also abou ins i u ional quali y and go e nance. 6.2. Implica ions and Conside a ions o he Basque Con ex While his s udy does no seek o p esc ibe o e alua e speci ic policy in e en ions, he compa a i e pe spec i e in i es e lec ion on b oade s a egic hemes ele an o egions like he Basque Coun y. One cen al lesson is ha egional compe i i eness is no d i en by a singula model o impo ed bes p ac ices, bu a he by a egion’s capaci y o design and main ain s a egies ha a e consis en wi h i s ins i u ional con ex and de elopmen ajec o y. Needless o say, Baden-Wü embe g illus a es he long- e m alue o s able indus ial coope a ion ne wo ks, dual oca ional educa ion, and in e media y ins i u ions ha ansla e esea ch in o applied inno a ion. These sys ems a e no he esul o sho - e m policy bu o decades o collabo a i e e o and ins i u ional e olu ion. The Basque Coun y has ollowed i s own dis inc pa h, g ounded in p oac i e indus ial policy, s ong public leade ship, and delibe a e ins i u ional building. One o i s key s eng hs lies in he exis ence o o ganisa ions ha gene a e c i ical knowledge and enable e idence-based policymaking. A no able example is O kes a (The Basque Ins i u e o Compe i i eness), which plays a i al ole in moni o ing compe i i eness ends, assessing policy s a egies, and acili a ing dialogue among policymake s, academics, and p i a e ac o s. O kes a's wo k, embedded in he academic and policy landscape, con ibu es o a cul u e o e lec ion and accoun abili y ha s eng hens he egion’s s a egic go e nance. This ins i u ional capaci y o c i ical assessmen , a e in many egional con ex s, sugges s ha he Basque Coun y is no only implemen ing s a egies bu ac i ely lea ning om hem. Ra he han iewing Baden-Wü embe g as a empla e o emula e, he compa ison se es o 36 highligh al e na i e mechanisms o building us , enhancing science-indus y connec ions, o expanding oca ional and echnical pa hways, which may inspi e u he adap a ion in he Basque model. Ul ima ely, bo h cases illus a e ha egional compe i i eness is less abou policy ins umen s pe se and mo e abou long- e m commi men , s akeholde coo dina ion, and he abili y o align economic de elopmen wi h ins i u ional capabili ies. 6.3. Limi a ions o he S udy and Fu u e Resea ch Di ec ions Despi e he dep h o his compa a i e analysis, se e al limi a ions should be acknowledged. Fi s , he use o he RCI 2.0 as a cen al benchma king ool in oduces a deg ee o abs ac ion. While i o e s a ich, mul idimensional iew o compe i i eness, i simpli ies complex eali ies in o composi e indica o s, po en ially masking unde lying socio-poli ical dynamics. Addi ionally, in he case o Baden-Wü embe g, which is assessed a he NUTS 1 le el, he RCI sco e agg ega es da a om ou NUTS 2 sub- egions. This a e aging may o e look in a- egional a ia ions, hough in his case he sub- egions end o ollow a simila pa e n. Second, while he quali a i e analysis aimed o con ex ualise hese da a, he scope o he s udy necessa ily imposed limi s. Ce ain opics— o example sec o al specialisa ion, policy implemen a ion p ac ices, o egional inno a ion go e nance—dese e deepe in es iga ion. Mo eo e , his s udy did no aim o measu e he di ec impac o speci ic policies, no o make causal claims abou ou comes. Finally, he compa ison was es ic ed o wo egions, bo h o which a e ela i ely success ul and ins i u ionally capable. Expanding he analysis o include o he Eu opean egions—such as Uppe Aus ia, No h Rhine-Wes phalia, o Lomba dy—could o e u he insigh s, pa icula ly in iden i ying di e gen models o hyb id s a egies. Fu u e esea ch could build on his ounda ion by in eg a ing compa a i e benchma king wi h ieldwo k, such as in e iews wi h key s akeholde s o de ailed policy analysis. 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