Competitive funding in North Rhine-Westphalia: Advantages and drawbacks of a novel delivery system for cluster policies

Purpose This paper aims to examine a cluster-based strategy implemented in the German federal state of North Rhine-Westphalia under the 2007-2013 “Regional Competitiveness and Employment” programme. Departing from traditional discretionary approaches, a substantial share of the funds was now allocated on a competitive basis. The authors analyse the resulting distribution of funds across stakeholders and sub-regions and try to assess the pros and cons of this process, which constitutes a novel delivery system for cluster policies. Design/methodology/approach Following a literature review, the paper applies two sets of regression models to explain the distribution of funds under the new policy delivery system. Interviews with stakeholders provide evidence on the efficacy and efficiency of the competitive funding process. Findings The changes introduced in the 2007-2013 funding period benefit universities and research organisations, as well as intermediary organisations, whereas the private sector and especially small firms capture a rather small piece of the pie. Contrary to the “innovation paradox” hypothesis, structurally weak sub-regions did not lose out in state-wide funding contests. The presence of universities with an overall high volume of third-party funding is the key variable explaining the spatial distribution of funds. This interview evidence identifies the duration of the selection process and its administrative complexity as main weaknesses, which the authors attribute to bureaucratic rationality on different levels. Originality/value This is the first analysis of a competitive funding scheme at the sub-national level, using the German federal state of North Rhine-Westphalia as a case study. It sheds light on the mechanisms of funding allocation in the 2007-2013 funding period of the European Union’s cohesion policy, which was reoriented towards supporting regional competitiveness and employment in response to the Lisbon Agenda. While competitive funding is still seen as mobilising regional stakeholders and improving the quality of projects and the selection process, these findings highlight administrative complexity as a main deficiency, which has partly been addressed in the 2014-2020 funding period.