Regions hold multiple functions for politics and society. For nation states, regions are a vital means of ordering and governing territories, populations and their activities. Economically, they are frequently held together by networks of labor markets, industries, and specialization, often with significant path dependencies. For the local population, regions are markers of a shared identity and political expression (Melucci 1996; Supik 2005; Rentrop 2021). Aligning to this, global competition takes place not only at the national or firm level, but increasingly between regions (Koch and Warneken 2007). In this inter-regional competition, some regions hold considerable global reputations (e.g., Silicon Valley), while others are overlooked. Within these dynamics, a key tension exists between, on the one hand, socio-economic transformation, innovative disruption, and a global orientation and, on the other hand, the need for continuity in social orders, cohesion, and region-specific outcomes (Pfotenhauer et al. 2023).

To analyze this tension, this paper examines the interplay of regions, innovation, and transition governance, exploring how these collectively influence transformative regional developments. We chose two distinct German regions currently undergoing significant transformations. The Rhenish Region (RR) is pressured into reinventing itself as lignite mining by large companies and assisted by small and medium-sized enterprises (SMEs) has been politically abolished. Heilbronn-Franconia (HN-F) is characterized by the Mittelstand, striving for a transformation from a position of strength to develop the regional economy through information technology (IT) and artificial intelligence (AI). The ‘Mittelstand’ is an economic policy term that is highly significant in the German discourse, as its economic structure is primarily built on the ‘Mittelstand’. It consists of SMEs. A defining feature is (1) the unity of ownership, liability, and management; (2) up to two natural persons or their family members hold at least 50 % of a company’s shares, and (3) these individuals are also part of the company’s management (Handelskammer Hamburg 2025).

We have chosen these contrasting cases to explore how differently regional transformation is governed long-term and what ways of imagining the future and transition paths can be seen. A long-term governance perspective is essential for guiding dynamic regional transformation. This lens allows to depict and understand the transformation as a whole. We aim for a side-by-side description, representing snapshots of the current transformational moment.

In the following, we will move along three strands that guide our analysis, addressing regions, innovation, and governance, combining them into a triad (Fig. 1). Due to limited space, some aspects will be solely addressed in the discussion. We understand regions as a form of situated social contract, expressed through unique regional identities, that combine distinct transition concerns and legacies, governance approaches, and innovation activities and across sectors in various initiatives.

The perspective on regions reveals a meaningful look at how competition is experienced and governed in a globalized world. To enhance manageability, many, especially federally structured, states have adopted regions as an organizing principle, granting them certain statehood properties (van Langenhove 2013). Beyond the political and governance perspective, regions are viewed as “social constructs that were (re)produced by social actors in and through variegated social practices and discourses. [It is the] outcome of contestable ‘region-building’ or regionalization processes” (Paasi and Metzger 2017, p. 22). The social contract of regions is expressed through identity, being reflected in regionally specific ways of governance and innovation. Like regions themselves, identity, as Stuart Hall (2011, p. 9) argues, is the “point of suture” between discourses, practices, and processes of subjectification (Supik 2005). Melucci (1996) further defines collective identity as a dynamic process that (a) involves cognitive definitions of goals, means, and the field of action, (b) relies on a network of active relationships between actors, and (c) entails a certain degree of emotional investment.

Place-based policies are often used as a response to temporal dimensions in the governance of regional transformation, which are understood as “a long-term strategy aimed at tackling persistent underutilization of potential and reducing persistent social exclusion in specific places through external interventions and multilevel governance” (Barca 2009, p. 7). A vital aspect to the contextualization of policies is the reflection of available resources and capabilities (Morisson and Doussineau 2019, p. 102). Therefore, Voß et al. (2009, p. 297) propose a “reflexive governance” that allows for experimentation with policy instruments rather than determining them upfront. Further developing the concept of “regional governance”, it refers to “deliberate efforts by multiple actors to achieve goals in multi-jurisdiction environments”, spanning “jurisdictional, sectoral […] functional borders” by utilizing, for instance, “institutions, tools, or structures” to achieve certain goals (Foster and Barnes 2012, pp. 273–274).

Politically-driven mitigation strategies target deficits of innovation (EC 2025; Pfotenhauer and Jasanoff 2017), which fuel the competition among regions, striving for a transformation that secures regional futures. The inherent promises of innovation in industry- and technology-driven regions, which also drive regional development, are often imagined as universal models that can be easily transferred from one context to another (Pfotenhauer and Jasanoff 2017). However, simple implementations rarely work, highlighting the necessity of contextualizing innovation through a region-specific lens, as suggested by the concept of “regional innovation cultures”, where innovation is regionally-specific imagined, and materialized as “unique ways in which regional innovation initiatives and technology developments (their goals, meanings, material organization, and actor constellations) are being brought into alignment with local identity, socio-economic legacies, and unique political cultures” (Pfotenhauer et al. 2023, p. 2). This concept provides a culturally inflected look at innovation ecosystems, which Granstrand and Holgersson (2020, p. 3) define as an “evolving set of actors, activities, and artifacts, and the institutions and relations, including complementary and substitute relations, that are important for the innovative performance of an actor or a population of actors”. Other scholars have linked these concerns to the challenge of regional transformations by examining transformative innovation ecosystems, asking how certain situational particularities react and construct innovation by combining desirability with viability (Neudert et al. 2024). These innovation cultures and transformative ecosystems are regionally specific and play a key role in articulating and negotiating visions of viable and desirable futures, providing durable frames of reference, allocating material and other resources, and supporting the governance of innovation (Adner 2017; Bacon et al. 2019). Innovation ecosystems speak to policymakers, funding agencies, industrial representatives, and municipal officials as a way to govern innovation that is often time unrefracting and taken as a best practice approach.

We draw on semi-structured interviews with multiple actors from both regions. While scholar Cindy Rentrop (CR) conducted 31 interviews in Heilbronn-Franconia, scholar Stefan John (SJ) conducted 15 semi-structured interviews with actors in the Rhenish Lignite Area. Additionally, CR participated in economic conferences that addressed the regional innovation ecosystem related to the national and global innovation discourse and SJ participated in multiple participant observation sessions and workshops addressing structural change in the RR, with a particular emphasis on the emerging hydrogen innovation ecosystem and its governance. To compare these two cases, we drew on thematic categories abstracted from the conceptual inroads presented above and followed qualitative content analysis after Schreier (2012) with a positionality of constructivist grounded theory (Charmaz 2014) in which we reflect upon the methodological approach as socially constructed.

While both cases reflect a desire and a need for transformation, governed through top-down strategies, they share a common goal: stability. This represents an extension of the past toward a desirable future, ensuring regional stability while aligning with the social contract and its existing (power-)structures. While economic security and prosperity remain central, the strategies to achieve them vary significantly. However, the governance of regional transformation does not fully integrate the social contract into its approach. Although both cases strive for the same goal, they risk losing sight of the respective fabric of the social contract.

While HN prioritizes the understanding and performance of innovation, the RR focuses on social cohesion. HN is analyzed as less reflexive, characterized by a top-down approach with immediate impacts, due to the performance-driven innovation approach. It reveals a collision between two distinct innovation cultures, dividing between the ‘new’ and the ‘old’ that unsettles the familiar homogeneous and stable socioeconomic order. The RR is also governed with a top-down approach, in a more reflexive manner, which provides multiple initiatives for public engagement, facilitated by a broader frame and the spending of public funding. While the RR is already characterized by its established landscape on education and research, HN is coined by an incremental approach to innovation that is tied to the Mittelstand as a feature of its social contract. Both regions imagine education and research in specific technologies as the panacea to the transition concerns. In HN, this panacea is imagined through IT and AI, whereas in the RR, it is narrated, among other panaceas, around hydrogen technologies and their implementation and demonstration.

We observe that both approaches entail different temporal consequences due to the nature of private and public funding (Table 1). From a long-term governance perspective, even ostensibly long-term strategies can have unforeseen short-term consequences. In HN, this includes rising rent prices and a divide between the ‘old’ and ‘new’, while in RR, it manifests as competition between different future pathways and infrastructures. In canon with critical scholarship, both cases demonstrate that governance approaches must be reflected from both short- and long-term perspectives, that are derived from ‘place-based’ circumstances that take into account regional particularities (Morisson and Doussineau 2019; Pfotenhauer et al. 2023). Especially in infrastructural aspects, these considerations should include the ideas of scalability, updatability, and inclusivity (Böschen et al. 2024). Similarly, regional transformation must be analyzed in relation to constructed deficits in the innovation discourse (Pfotenhauer et al. 2019).

While much attention is often paid to the differences, we argue that focusing on commonalities can facilitate more effective and inclusive transformation processes, enabling regions to learn from one another. Although comparing our two cases highlights key differences in the triad of transition concerns, innovation, and governance, both share a common desire for stability, deeply embedded in their social contract. This finding suggests that the governance of long-term regional transformation can be more effectively understood by examining the social contract through the lens of regional innovation cultures. Despite shared perceptions of transition concerns, the cases reveal stark differences in funding schemes, style of governance, the involvement of certain actor groups, and the materialization and performance of the panacea. Long-term governance of regional transformation must address how regional particularities are reproduced in the imagination, materialization, and performance of the panacea to understand how political categories emerge and influence the regional pathways of innovation.

Focusing on commonalities can facilitate more effective and inclusive transformation processes.

As regions constantly compete with one another for innovation, both the initial condition and the imagined innovation culture are vital in deriving sustainable and inclusive transformations. Engaging the public is especially meaningful as they constitute the regions. However, only time can show how successfully both projects will materialize and perform. The case of HN highlights the need for a close governance approach that involves the public to address the divide between long-term successes and short-term impacts, especially when it comes to balancing the economic and social dimension (Rentrop et al. 2024), which also applies to the case of RR.

Our cases illustrate varying levels of reflexivity in long-term governance. In line with our triad, we have argued that regional transformation should be monitored through short- and long-term governance, which requires the reflection of socioeconomic and sociocultural impacts. We argue that effective governance must critically deconstruct the narratives and imaginaries of deficits and panaceas underlying regional transformation. This approach is critical to understanding politically charged pathways that risk eroding social contracts. Social contracts that, in our cases, serve as anchors for stability aimed at enhancing the past. By adopting this approach, we enable a more inclusive and sustainable governance process for transformation that prioritizes collective well-being over mere structural change.