Tradition and Innovation. The complementarities of geographic indications, patents and trademarks in the food sector

Federico Munari (Univeristy of Bologna), “Tradition and Innovation. The complementarities of geographic indications, patents and trademarks in the food sector”

Why do some regional economies become locked-in into development paths that lose dynamism, while other regions are able to explore new paths and sustain economic growth? How can regions avoid counterproductive lock-in traps? Based on insights from evolutionary economics and competence theory of the firm (Lawson, 1999; Martin and Sunley, 2006), several scholars have tried to address such fundamental questions in order to explain regional development dynamics. Such literature has provided different explanations and illustrative examples of situations where regional or local economies have become stuck in established technologies, practices, ideas, values and networks that no longer brought increasing returns (Fuchs and Shapira, 2005; Glasmeier, 1991; Grabher, 1993; Hassinik, 2005). In such cases, the cumulated stock of resources, capabilities and values that caused economic success in the past (also in the course of various centuries) eventually become a source of weakness and sometimes also of decline. Communities over-dependent on tradition and past trajectories, in fact, might be at risk of perpetrating established beliefs, learning and routines, ultimately discouraging the exploration of new innovative solutions in the long run (Munari et al., 2011; Lazerson and Lorenzoni, 1999). Such backward-looking dynamics are thus at risk of hampering the efficiency and evolution of localized economic systems (Bathelt et al., 2004; Uzzi, 1997).

In this paper, we intend to provide a contribution to such literature by addressing the research questions of why some regions are capable of escaping lock-in traps, while others are not. We argue that the capacity of pursuing a right balance of focus on tradition and innovation at the regional level is required in order to enhance regional economic growth. To this purpose, we introduce the concept of “ambidextrous” region to identify a local system capable of simultaneously exploit the know-how and values associated to traditional economic trajectories in a given sector, and explore new technological and symbolic paths, so to renew and upgrade itself. We then advance that ambidextrous regions are characterized by stronger rates of economic growth as compared to regions that are either too focused on preserving tradition or on exclusively exploring new paths.

We study our predictions in the food sector, by using geographic indications (GIs), patents and trademarks to capture the orientation of a given region towards tradition (as in the case of GIs) or innovation (as in the case of patents and trademarks). Geographic indications represent distinctive signs used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin (Bramley et al., 2009; Rangnekar, 2006). GIs are collectively owned with a strong inherent origin-base, namely the geographical origin to which they refer. The unique and differential characteristics of a product protected by GIs, therefore, can derive by the specific features of the territory of the good, but also by traditional know- how used in the various steps of the production process (WIPO, 2015). Indeed, products identified by a GI are typically the result of an historical process of knowledge accumulation developed by a community in a particular region, often in the course of entire centuries. GI protection thus is also rooted in the recognition of the cultural significance of traditional knowledge and it can pursue the objective to preserve such knowledge for future generations. Patents and trademarks, on the other hand, are more directly associated with the results of innovative processes, respectively in terms of new technical functionalities or in terms of new symbols, meanings and appearances (Greenhalgh and Rogers, 2006; Mendonca et al., 2004; Munari and Santoni, 2010; Verganti, 2008). Thus, whereas patents relate more to the scientific and technological aspects of innovative products and services, trademarks relate to the more commercial, symbolic and visual aspects (Ramello, 2006; Rujas, 1999).

We address our research questions in the case of Italy, using data from the food sector and 108 Italian provinces. We assess the impact on local economic growth of the stock of GIs and the number of food- related patents and trademarks generated in the provinces. We also analyse whether the complementary presence of GIs, patents and trademarks in a province is associated to stronger economic growth, as a way to test our predictions on “ambi-dextrous” regions. Economic growth at the province-level is measured by the annual growth rate of worldwide sales (export) of food products. We refer to the ATECO
classification of industries to identify the food sector and use ISTAT (Italian Office for Statistics) to collect data on provincial worldwide sales in the food sector. We recur to information from the Italian Ministry of Food and Agriculture to identify the number of registered GIs in each province, starting from the first GI registration in 1996. We identify the number of food-related patents at the province level (EPO patent filings) using Patstat and the IPC classification system. We identify the number of food-related trademarks at the province level (Community Trademarks Filings) using the OHIM Database and the NICE classification system.
In order to determine the importance of tradition and innovation in determining regional growth, we use a regression analysis framework based on Piergiovanni et al. (2012), for data covering all 108 Italian provinces over the period 2004-2014. Our dependent variable is the relative growth rate of worldwide sales of food products (per province) in year t. We use a one-period lagged variable related to the stock of registered GIs in the respective province in order to capture the orientation towards tradition. We use one-period lagged explanatory variables looking respectively at the incremental growth of patents and of trademarks by province. We also use one-period lagged explanatory variables on the number of trademarks and patents in the respective province relative to 1000 employees. We then control for several indicators of historical and current provincial conditions. In order to test complementarity effects between the different forms of IPRs, we employ interaction effects models.

Our preliminary results show that there were 292 registrations of GIs in Italy over the period 1996-2014, with an average value of GIs per province of 8,8 in 2014 (as the same GI can be shared by different provinces), although there is a high variance among provinces. The number of food-related community trademarks in the period under analysis corresponds to 7940 (on average, 7.21 trademark per province per year). No statistically significant correlation seems to exist between provincial economic growth rates and stock of GIs, whereas a positive association seems to exist between provincial economic growth rates and the number of filed trademarks.