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Robert WellsHead of the Biotechnology UnitOECDToronto, CA – 25 February 2011 1
Global Business Innovation by SMEs: The OECD Perspective
What we’ll cover today…
• What is the OECD and what does it do?
• The OECD Innovation Strategy• The OECD and SMEs• Policy Recommendations to
Strengthen the SME environment
2
What is the OECD?
• Born after World War II to coordinate/implement the “Marshall Plan” for reconstruction of Europe
• Advises governments on economic, social and technological policies (science, innovation, health etc…) and contributes to economic growth and globalisation
• Today the OECD has 34 member countries in North America, Europe, and Asia-Pacific.
3
OECD Global Outreach
4
World Population in 2030
Source: Salim Sawaya, based on medium variant of the UN Population Division’s “World Population Prospects: The 2006 Revision Population Database”
Long term, it’s the new countries that will impact the OECD more than the OECD will
impact them (at least in Biotech)
• Singapore– Regulatory redesign with HSA
• India– Virtual drug development model
• China– Contributions in industrial biotech
6
How Countries Make Use of the OECD
• Think tank / policy development• Intelligence gathering• Multi-lateral engagement and build
consensus• Float ideas and “de-politicize” them• Make international contribution on
priority issues
7
What the OECD Does: Main Bodies of Work
• Economic and statistical baselines– Science and Technology Outlook
• Policy analysis– Pharmacogenetics Report
• Guidelines , recommendations and standards– Molecular genetic testing– Licensing of genetic inventions– Human biobanks and genetic research
databases 8
International Soft Law Development
• IPRs and management of intellectual assets • Biosecurity – balancing access and security• Quality assurance of biological materials
& data• Personalised medicine – QA & proficiency• Privacy and confidentiality of data• Towards industrial sustainability
standards
9
Policy Development & Consensus
• Science and economic outlooks• Innovation policy review and development• Knowledge networks and IP markets• Technology convergence • New forms of governance• International cooperation in STI• Human genetics & personalised medicine• Biotech & green innovation• Food security• Dual use security 10
12
Innovation is the implementation of a new or significantly improved product, process, new marketing method, or a new organisational method in business practices, workplace organisation or external relations.
Defining innovation
Source: OECD (2005), Oslo Manual, Paris, 3rd Edition.
13
21st Century Innovation: the iPod
Distribution of the value added
• 299 US$– 75$ profit to US (Apple)– 73$ whls/retail US
(Apple)
The Apple iPod = 299$ of Chinese exports to US
http://blogs.computerworld.com/node/5724
• iTunes Music Store (2003)– 70% digital market share– Big 5 recording
companies
– 75$ to Japan (Toshiba)– 60$ 400 parts from Asia– 15$ 16 parts from the US– 2$ assembly by China
Economies are driven by innovation: It is a fundamental economic investment...
14
Investment in fixed and intangible assets as a share of GDP, 2006
Source: Data on intangible investment are based on COINVEST [www.coinvest.org.uk] and research papers, 2009.
0
5
10
15
20
25
30
Italy
Jap
an
(20
05
)
Au
stra
lia
Ca
na
da
(20
05
)
Sw
ed
en
Fra
nce
Ge
rma
ny
Un
ited
Sta
tes
Un
ited
Kin
gd
om
%
Machinery and equipment Software and databases
R&D and other intellectual property products Brand equity, firm specific human capital, organisational capital
15
…with increasing importance...
Investment in intangible assets as a percentage of GDP
Source: COINVEST [www.coinvest.org.uk] and research papers, 2009.
0
2
4
6
8
10
12
14
19
75
19
76
19
77
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
%Australia Canada France Germany Italy Japan United Kingdom United States
...and a driver of productivity...
16
Contributions to labour productivity growth, 1995-2006
Source: COINVEST [www.coinvest.org.uk] and research papers, 2009.
-1
0
1
2
3
4
5
Sw
eden
(199
5-20
04)
Uni
ted
Kin
gd
om
Aus
tral
ia(1
995-
2003
)
Uni
ted
Sta
tes
Jap
an (2
000-
2005
)
Fra
nce
Ger
man
y
Italy
%Labour quality Physical capital deepening
Multifactor productivity Intangible capital deepening
1717 17
… that can help address global social challenges neglected by markets.
18
Innovation is not only about R&D... New to market product innovators with and without R&D, 2004-06 (or latest)
As a percentage of innovative firms by R&D status
0
10
20
30
40
50
60
70
Aus
tria
Icel
and
(20
02-0
4)
Sw
eden
Can
ada
(200
2-04
, m
anuf
actu
ring
)
No
rway
Italy
Jap
an (1
999-
2001
) Sp
ain
Aus
tral
ia (
2006
-07
)
Po
rtug
al
Uni
ted
Kin
gd
om
Ko
rea
(200
5-07
, m
anuf
actu
ring
)
Innovative f irms without R&D Innovative f irms with in-house R&D%
Source: OECD (2010), Measuring Innovation: A New Perspective, OECD, Paris.
...it includes design & marketing...
19Source: IMD (2000) Innovation and Rennovation: The Nespresso Story, IMD046, 03/2003
2020
...and is multidisciplinary.
Green Technology
Chemical Engineering Chemistry Material
Science Physics
Agricultural and Biological
Sciences
Immunologyand
Microbiology
Biochemistry, Genetics and
Molecular Biology
Energy
Earth and Planetary Sciences
Engineering
EnvironmentalScience
17.4%10.5%
4.9%
7.5%5.7%3.7%6.6%
4.8%
10.6%
9.5%14.2%
ScientificPapers
Patents
Patent-science link via citations
(100% = all citations)
Legend:
Scientific publications cited by “green” patents
Source: OECD (2010), Measuring Innovation: A New Perspective, OECD, Paris.
21
How innovation is conducted has become more collaborative
and “open”.
22
There is more collaboration among scientists...
Trends in co-authorship in scientific publications
0
50
100
150
200
250
300
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
Thousands
Internationalco-authorship
Single-institutionco-authorship
Domesticco-authorship
Single author
Source: OECD (2009), OECD Science, Technology and Industry Scoreboard 2009.
23
...and between firms.Firms with national/international collaboration on innovation, 2004-06
As a percentage of innovative firms
Source: OECD (2010), Measuring Innovation: A New Perspective, OECD, Paris based on OECD, Innovation microdata project.
0
10
20
30
40
50
60
Fin
lan
d
Ch
ile
Sw
ed
en
De
nm
ark
Lu
xem
bo
urg
Ice
lan
d (2
00
2-0
4)
Un
ited
Kin
gd
om
Jap
an
(19
99
-20
01
)
Ca
na
da
(20
02
-04
, m
an
ufa
ctu
ring
)
Ch
ina
Au
stra
lia (2
00
6-0
7)
Ko
rea
(20
05
-07
, m
an
ufa
ctu
ring
)
Po
rtu
ga
l
Sp
ain
Ge
rma
ny
Italy
National collaboration only International collaboration%
24
Where innovation occurs has changed becoming more global.
Science is increasingly international….
25
Canada
Korea
ItalyNetherlands
Switzerland
India
BelgiumSweden
Russian Federation
Poland
Australia
Brazil
Spain
United States
Germany
France
China
Japan
United Kingdom
1998 2008
Canada
Korea
ItalyNetherlands
Switzerland
India
BelgiumSweden
Russian Federation.
Poland
China
Japan
Australia
Brazil
Spain
United States
Germany
France
United Kingdom
Source: OECD (2010) Measuring Innovation: A New Perspective
2626
UK
The alignment of innovation has shifted.
Innovation is key to growth... Contributions to labour productivity growth, 1995-2006, in %
* Investment in intangibles and multi-factor productivity growth account for between two-thirds and three-quarters of labour productivity growth.
-1
0
1
2
3
4
5
6
Intangible capital MFP Non-ICT capitalICT capital Tangible capital Labour quality
Decomposition of cross-country differences in GDP per capita into their determinants, 2005
(United States = 100)
GDP PPP per capita TFP Human capital Physical capital Employment
United States 100.0 100.0 100.0 100.0 100.0Canada 83.5 72.0 103.3 105.8 106.0
Japan 72.6 52.6 100.4 130.7 105.1
China 9.8 13.6 57.3 105.2 119.5
India 5.2 12.7 47.7 98.3 87.1
Brazil 20.5 29.3 70.1 103.1 96.8
Russian Federation 28.6 31.5 84.9 97.4 99.3
EU27 + EFTA 64.7 67.8 91.2 114.1 91.3
Total World 22.8 27.9 642 104.2 95.8
Source: OECD.
• … accounts for most of the difference between developed and emerging economies…
Innovation can help address global challenges such as climate change
Potential technological contributions to CO2 emission reductions
Note: WEO refers to the IEA’s 2007 World Energy Outlook.Source: International Energy Agency, Energy Technology Perspectives 2008: Scenarios and Strategies to 2050.
0
10
20
30
40
50
60
70
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Em
iss
ion
s (G
t C
O2)
WEO 2007 450 ppm case ETP2008 analysis
BLUE Map emissions 14 Gt
Baseline emissions 62 Gt
CCS industry and transformation (9%)
CCS power generation (10%)
Nuclear (6%)
Renewables (21%)
Power generation efficiencyand fuel switching (7%)
End use fuel switching (11%)
End use electricity efficiency (12%)
End use fuel efficiency (24%)
Biotech reliance on Science… Reliance of patents on science citations
(biochemistry papers cited by pharmaceutical patents)
57.7
64.8
48.6
58.8
30.7
58.9
81.9
9.0
6.3
11.7
21.7
18.4
28.0
6.6
17.6
22.7
15.4
10.4
9.8
6.0
4.3
3.9
5.4
14.3
8.4
14.1
13.3
7.6
0% 20% 40% 60% 80% 100%
United States
Japan
United Kingdom
Germany
France
China
Korea
Higher education Government Industry Non profit
Hospital Other NA
New global players have emerged …
Contributions to growth in global R&D, 1996-2001 and 2001-2006(in billion constant US PPP and %)
37%
16%
23%
15%
7%
13%
10%
13%
11%
30%
12%
13%
0
20
40
60
80
100
120
140
160
180
1996-2001 2001-2006
Other non-OECD (2)
China
Other OECD (1)
Japan
EU-27
United States
Note: (1) Australia, Canada, Iceland, Korea, Mexico, New Zealand, Norway and Turkey (2) Argentina, Brazil, India, Israel, Russian Federation, Singapore, South Africa, Chinese TaipeiSource: OECD.
…. demand for graduates is unabatedDoctoral graduates as a percentage of total OECD new graduates at
doctorate level
0
5
10
15
20
25
30
% All fields of study Science and engineering
Source: OECD (2009), Education at a Glance 2009: OECD Indicators, Paris
… with mobility playing an important role. International students, 2007
As a percentage of all tertiary enrolment
05
10
15
20
25
Slo
vak
Re
pu
blic
Slo
ven
ia
Est
on
ia
Sp
ain
No
rwa
y
Jap
an
Hu
ng
ary
Un
ited
Sta
tes
Fin
lan
d
Ne
the
rla
nd
s
Ice
lan
d
Sw
ed
en
De
nm
ark
Cze
ch R
ep
ub
lic
EU
19
ave
rag
e
OE
CD
ave
rag
e
Be
lgiu
m
Ca
na
da
Ire
lan
d
Au
stri
a
Ne
w Z
ea
lan
d
Sw
itze
rla
nd
Un
ited
Kin
gd
om
Au
stra
lia
%
• Source: OECD, Education at a Glance 2009.
... and innovation increasingly happens across borders
(institutions, countries, disciplines).
34Source: OECD Patent Database.
Technological and non-technological innovation unevenly distributed
Patents and trademarks per capita, 2005-07Average number per million population, OECD and G20 countries
AustraliaAustria
BelgiumCanada
Czech Republic
Denmark
FinlandFrance
Germany
GreeceHungary
Iceland
Ireland
Italy
Japan
Korea
Luxembourg
Mexico
NetherlandsNew Zealand
Norway
Poland
Portugal
Slovak Republic
Spain
Sweden
Switzerland
Turkey
United Kingdom
UnitedStates
EU27 OECD
World total
BRIICS
Argentina
Brazil
China
India
Russian Federation
Saudi Arabia
South Africa
0
1
10
100
0 1 10 100
Cross-border trademarks per capita (log)
Triadic patent families per capita (log)
37
(indexed on 1980=1.0, Annex 1 ratification countries)
Policy can induce greater innovation
Patenting in climate mitigation technologies relative to all sectors
Innovation and SMEs
• SMEs are ESSENTIAL• In the OECD, SMEs represent major share
of all firms (99%), all employment (two-thirds) and value added (over one-half)
• Importance of SMEs to innovation has increased
• Significant burdens are on SMEs (financing and skills)
• New firms and SMEs do not innovate alone but in collaboration with others
38
Some Historical Perspective on Innovation
• Schumpeter Mark I: “creative destruction” in the early 20th century
• Schumpeter Mark II or “Managed Economy”: 1040s to 1970s
• Entrepreneurial Economy: role of new and small firms on the rise again.– The importance multiple market niches,
increased efficiency of SMEs, ICTs, reduction in transaction costs
– “flexible specialisation” 39
Policy Implications
• Entrepreneurship culture• SME and entrepreneurship
framework conditions• Firm dynamics• Access to finance• High-employment-growth firms• Innovation in the bulk of SMEs• Knowledge transfer
40
Policy Implications (cont’d)
• Workforce skills in SMEs• Entrepreneurship skills• Social entrepreneurship and social
innovation
41
Policy Recommendations: Strengthen Innovation through SMEs and
Entrepreneurship1. Promote conducive entrepreneurship
cultures and framework conditions2. Embed new firms and SMEs in
knowledge flows3. Strengthen entrepreneurial human
capital4. Improve the environment for social
entrepreneurship and social innovations
42
1. Promote Conducive Entrepreneurship Cultures and Framework Conditions
• Foster positive attitudes in society toward business start-up and growth through education and the media
• Ensure that regulatory and governance frameworks take into account the needs of SMEs
• Facilitate the interlinked process of firm life cycles: entry, growth, decline and exit
• Tackle finance gaps affecting new and small firms
43
2. Embed New Firms and SMEs in Knowledge Flows
• Strengthen knowledge-based entrepreneurship by providing advice and training to entrepreneurs with strong technical knowledge and develop programs for corporate spin-offs, incl. proof-of-concept, pre-competitive research and seed funding support.
• Promote partnerships and collaboration activities within innovation systems and provide the infrastructure for these collaborations
44
2. Embed New Firms and SMEs in Knowledge Flows (cont’d)
• Promote knowledge spillovers among “related variety” industries with related competencies and knowledge bases to facilitate cross-sectoral combination of products, services and technologies with growth potential.
• Encourage openness of innovation systems and their SMEs to global sources of knowledge by facilitating cross-border strategic alliances such as marketing and technology partnerships, securing better linkages between SMEs and foreign direct investment and attracting highly skilled labour from abroad
45
3. Strengthen Entrepreneurial Human Capital
• Build up entrepreneurship education in universities and higher education by shifting the emphasis from business management to growth-oriented entrepreneurship
• Strengthen vocational education and training programs for business founders, SME and SME workforces by changing the nature of vocational training to better meet the needs of the SME environment
• Embed teaching of the entrepreneurial mindset in schools through changes in curricula and teacher training
• Reinforce training in SME relevant skills through in-company projects and in cooperation with labour and management, apprenticeships, etc.
46
4. Improve the Environment for Social Entrepreneurship and Social Innovation
• Build supportive financial, fiscal, legal and regulatory environments
• More and better research into social entrepreneurship/innovation in order to better understand and support them
• Evaluate the impacts of social entrepreneurship and social innovation policies
• Introduce social clauses into public procurement contracts
• Establish social innovation funds in specific fields• Create incubators for social enterprises and
intermediaries for social innovation47
Contacts: www.oecd.org/sti/innovationwww.oecd.org/biotechnology
48
