There is a corner of Italy that is world renowned for its history, culture, food, wine and idyllic holiday villas frequented by world leaders. But scratch a little deeper and a region that has also created a global reputation for quality R&D and technology development emerges.

Tuscany is a region where old meets new, and where arts and sciences sit comfortably together. High-tech innovation has a part to play in some of the region’s oldest and most traditional sectors. Take Laboratorio NEST: the National Enterprise for NanoScience and NanoTechnology, whose work in nanotechnology could lead to new products and industries in the future, but has also been involved in developing nanotechnology for fairly surprising sectors from the past. “Nanotechnology can do a lot for textiles,” says Fabio Beltram, a professor of the Scuola Normale Superiore di Pisa higher learning institution. “It can give special properties to clothing to make it non-stain, or to even be used to generate energy while a person walks so they can charge their mobile phone while out shopping. This is essential as you have to apply high-tech to protect traditional sectors so they don’t go overseas to Asia.”

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Tuscan businesses are also driving innovation that mixes the old with the new. Alongside EL En Group’s R&D work in medical technologies such as laser devices to cure psoriasis, the Florence-based firm has also designed and created a 5000-watt laser source for cutting and welding metals. Furthermore, laser methods are being developed for diagnostics for the preservation of Tuscany’s cultural heritage sector.

The region’s roll call of institutions focused on innovation include a broad mix of blue sky thinkers as well as those more closely linked to business-ready technology transfer. In Florence alone, you have the European Laboratory for Non-Linear Spectroscopy (LENS), which brings together a total of more than 100 physicists, chemists and biologists who work together in areas such as atomic physics, photonics, biophysics and chemistry. Other institutions in the city include Istituto di Chimica dei Composti Organometallici (ICCOM), which is part of the Consiglio Nazionale delle Ricerche (CNR); and the Magnetic Resonance Research Centre (Centro di Ricerca di Risonanze Magnetiche, CERM).

Team mentality

Collaboration between industry and institutions has been a feature of Tuscan life for some time. “We normally collaborate with research institutes, such as CNR, as well as universities including the University of Bologna and University of Pisa,” says Federico Neri, business intelligence project manager at Synthema, a human language technology firm that develops language and semantic intelligence, machine translation, data mining, text mining and speech solutions. “We spend about 30% to 35% of our time on EU, national or regional projects.”

“There’s a pretty long tradition of collaboration in optics and opto-electronics,” says Giovanni Masotti, vice-president of the industrial division at EL En Group. “Starting with the Galileo, and today within Finmeccanica, and Valfivre, and within our group as well as the research centres, an important cluster focused on optoelectronics has emerged.”

Technology districts are also helping promote collaboration and stimulating competitiveness in areas such as information and communications technology (ICT) and telecoms, life sciences, technologies for cultural goods, rail transport technologies and renewable energy sources.

US presence

US pharma giant Eli Lilly’s largest Italian plant is in Tuscany, at Sesto Fiorentino, and over time it has grown in its reputation within the company while moving up the value chain and into more research-intensive activities. Eli Lilly’s first investment in Tuscany came half a century ago, but there were big questions over the plant’s future in the late 1990s. Eventually, the head office decided to transform the site into a highly advanced insulin production facility. After a redesign, and a retraining of workers, it was reopened in 2009. In April 2009, new investment was approved which will double production capacity. R&D projects related to the manufacture of insulins are planned for the facility as well, and Eli Lilly managers point to the academic excellence of the area, good local schools for materials science and close partnerships with Italian universities as critical to the decision to reinvest in the facility.

Another well-known US firm, General Electric, also has invested heavily in the region, having found a successful fit. After buying a local firm which had developed a world-leading position in high-tech compressors in 1994, GE made it the headquarters for GE Oil & Gas – the only GE divisional headquarters located outside the US. GE Oil & Gas is planning to invest $70m in Italy in 2012, half of it in Tuscany. Research and testing functions, as well as engineering excellence, are key to the planned growth of the business.

Location, location, location

There is talk of a Tuscan Silicon Valley, where a scientific community in the world of ICT and life sciences meets the region’s many specialised small and medium-sized enterprises. But how does Tuscany match up to its better-known rivals?  “With conference call and internet technologies, [there is less of a need to be] close to everyone else,” says one entrepreneur. “We don’t have to be in Silicon Valley, California. We can sit here in Tuscany and easily talk – and collaborate – with partners in other parts of the world.”

But Tuscany’s location is not without its challenges. “The location can be both good and bad for attracting employees,” says Claudio Luchinat, a professor of chemistry at CERM. “If you want to attract people because this is a business area, it’s bad because this is not a business area with lots of CEOs. But in terms of attracting people to come here with their family, it’s good because Tuscany in general has [many] attractions.”

Dr Paolo Baroldi, who serves on the board of directors at biotech firm Galileo Research, which focuses on R&D in oncology and is a spin-off of pharmaceutical firm Abiogen, agrees: “There will always be people that choose the region for lifestyle reasons.” There is also the issue of salaries being typically lower than in other regions of Europe, which can make it tougher to attract people. However, Silvia Trasciatti, chief scientific officer at Galileo Research, says: “The lower salaries are very interesting for companies looking to keep costs down, and they help make Tuscany a very cost-effective part of Europe.”

Fighting spirit

This collaborative approach, combined with the idyllic lifestyle, is undoubtedly a big plus for Tuscany, but is it enough to pay the bills? Stories in Italy of double-dip recessions and a shrinking national economy create challenges, but Tuscany’s R&D organisations are squaring up to them.

Research institutions that traditionally rely on government funding say the financial crisis has continued a trend that has been building for some time.“Funding from public resources has decreased steadily in the past 15 years and from this point of view, the crisis has not impacted seriously on the trend,” says Maurizio Peruzzini, director at ICCOM-CNR.

Changes in funding have encouraged institutions to think more commercially. “The shortage of public funding has motivated us to look for more industrial contracts and to re-orient the research topics toward more applied issues,” says Mr Peruzzini. “However, and in spite of the pressing urgency to look for new funding opportunities on the market, it is becoming more and more difficult to convince the industry to invest in R&D. This second consequence of the economic crisis is, in my opinion, even more dangerous than the direct budget cut for research institutions.”

“Given the economic crisis, in Tuscany we were able to give institutional continuity to the economic emergency programme,” says Enrico Rossi, the region’s president. “We provided secured loans for €1.25bn to 7000 companies, involving funds to SMEs, we made calls for innovation, internationalisation and skilled services and we also renewed an agreement with 23 banks present in the territory for access to credit. The work carried out with the medium to large companies present in Tuscany and in attracting investment bore fruit in 2011 with a positive flow of FDI. We are rediscovering a sustainable industrial vocation that belongs to our past and that we now need to revive while aiming at innovation and exports in emerging markets.”

Additional reporting by Courtney Fingar.