The Globalisation of Knowledgeand European

Public Policy Responses

EULAKS Summer School„The Role of Social Sciences in the Construction of

Knowledge-based Societies: Latin America and European Perspectives“

Klaus Schuch

Core Conclusion of New Growth Theory and Innovation Economy

Growth and change are driven by innovations!

There is competition for new knowledge – endogenous and external technological progress

def: Innovation – [technologically] new or improved products introduced on the market or new or improved production-/distribution practices

def: technological change – extension of knowledge in way of new production and organisation technologies

Absorptive Capacity

Positive spill-overs (e.g. of TT) can only develop if the knowledge receiving company (or: institution) has the ability to make use of it and to enhance it through own contributions.

For the development of absorptive capacities the quality of educational institutions (e.g. universities) and policy (e.g. through allocation of resources) play a major role. The capacity of humans to acquire and use new qualifications is of essential importance for the assimilation and application of new technologies.

- cognitive dimension- social dimension- cultural dimension ...

National economies which do not invest in knowledge production might in the long term not be able to master the speed of progress of knowledge based economies (and societies).

If the possession of technological knowledge is a comparative advantage and a scarce resource, why does internationalisation of S&T take place?

Why does the EU finance the EULAKS summer school and your particpation in it?

Maceration of the Triadic Power (1)

1) mid of 1990ies: 50 leading countries responsible for 100 % of high-tech production and 99 % FDI and 98 % for S&T and education expenditures

2) The share of the triad in global R&D expenditure decrased from 83.2 % (in 1995) to 72.4 % (in 2005)

3) Erosion of EU (2nd half of 90s) and USA (after 9/11)

4) The share of non-OECD countries in global R&D expenditure more than doubled from 8.1% to 18.3% (mostly due to China)

Maceration of the Triadic Power (2)

1) More emerging economies (BRICS and many more) with Janus-shaped S&T demand (transition is driven by growing need AND by growing wealth)

2) Other high-(post-)industrialised small technology powerhouses (e.g. Israel, Singapore, Canada ...)

3) Business R&D expenditure became increasingly mobile since 1970ies (while public R&D expenditure remained more rooted in regional and national context)

Output Shares of World Manufacturing

Globalisation of business R&D: the changing distribution of R&D sites

55%49% 47%

40% 38%32% 34%

31%33%

31%

30%30%

31% 28%

9%11%

14%20%

19%18%

16%

2%5%

9%

4% 5% 5%

4% 6% 7% 8% 9% 8% 9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1975 1980 1985 1990 1995 2000 2004

Other

HomeCountry

India

China

US

Western Europe

Source: INSEAD survey of firms with a combined R&D spend in 2004 of US$ 76.4b, from 17 sectors and 19 countries

Globalisation of business R&D: the changing determinants of location

1996 to 2005

Legacy11%

Closeto HQ

7%

ProximityProduction

13%

Market &Customer

Insight19%

SkillsCapabilities

22%

Subsidiesincentives

14%

LowCost skills

9%

Up to 1979

Legacy29%

SkillsCapabilities

16%

ProximityProduction

18%

Close toHQ14%

MarketCustomer

10%

Subsidiesincentives

9%

1980 to 1995

Legacy17%

SkillsCapabilities

16%

Close toHQ10%

ProximityProduction

17%

Market &Customer

Insight19%

LowCost skills

2%

Subsidiesincentives

13%

Source: INSEAD surveyFDI in RTD:

RTD follows production

RTD follows excellence

1st generation

2nd generation

3rd generation

0%

5%

10%

15%

20%

1900 1920 1940 1960 1980 2000

-

Outsourced

Golden age of corporate R&D labs

4 th generation

During the late 19th and the early part of the 20th centuries, practically all research was conducted

outside the firm in stand-alone organisations Importance of innovation networks as

source of know-how

Balance between outsourced R&D and

in-house capacity

Now on a global scale

Open Innovation: a long-term perspective

Source: J. Guinet, OECD

Europe in the Global Research Landscape

Globalisation of R&D: the rise of new players

China is now the third largest government financier in R&D globally – with a target to reach an R&D intensity of 2.5% by 2020

China’s growth of R&D spending has been on average 18% a year since 1995

China now counts close to 1000 foreign R&D labs, accounting for about 25% of business R&D

Some firms now undertake R&D for the global market in China

Source: J. Guinet, OECD

Human Resources

1) In EU27 the working-age population (15-64 years) will

decrease between 2005 and 2050 by -19 %. In Japan the

decrease will be -38 % and increase in the USA by +23

%.

2) US leads globally in absolute numbers of researchers,

followed by EU and China.

3) India and China lead globally in number of MST

graduates.

Quality of Tertiary Education

Top world universities (Shanghai ranking 2006)

Americas Europe Asia-Pacific

Africa

Top 10 8 2 0 0

Top 50 39 9 2 (Tokyo, Kyoto)

0

Top 100 57 35 8 0

Top 500 198 205 93 4

Publications

1) In the world share of scientific publications EU-25 is in the

lead (38.1 % in 2004) followed by US (32.8), Japan (8.7

%), China (6.4%), Canada, Australia, Russia, South

Korea, India, Switzerland, Brazil, Taiwan and Israel.

2) Measured per million population, most productive is

Switzerland (2001 in 2004) followed by Israel (1416),

Australia (1148), Canada, US, EU-25, Taiwan, Japan,

South Korea, RF, Brazil (74), China and India.

3) EU leads in international co-publications (esp. intra-EU).

Patenting

Triadic Patents by residence of inventor in logarithmic scale

1

10

100

1000

10000

100000

1990 1995 2000 2003

US

EU-27

Japan

South Korea

China (incl. Hong Kong)

Taiw an

India

Singapore

Russia

South Africa

Brazil

World Market Shares

Export of High-Tech Products1999 2005 Av. annual

growth rate 1999-2005 (%)

US 26.4 19.3 -5.1

EU-25 17.1 17.2 0.2

China 3.4 15.0 28.1

Japan 12.0 8.7 -5.1

South Korea 4.7 5.8 3.5

Brazil 0.4 0.6 6.1

India 0.2 0.3 7.5

Russia 0.3 0.3 -4.1

The Enabling Importance ofNanotech, Biotech and ICT

1) Nanotechnologies enable other technologies by

providing a common framework for all hardware-level

engineering problems

2) Biotechnologies enable other technologies by identifying

chemical-physical processes in living systems

3) ICT enables other technologies through its ability to

represent physical states as information and model

processes (Nordmann, 2004)

Europe`s Position in Nanotechnology

1) Europe has a competitive research base, especially in

nanomaterials, nano-electronics and medical nano-biotechnology.

2) EU and USA account for more than half of the world publications in

nanoscience and nanotechnology, but China is expanding rapidly.

3) The largest increases in nanotechnology investments are made

outside the triad. In 2002 China allocated $ 200 million to

nanoscience; India allocated the same amount in 2006. In Russia the

government allocated $ 400 million in 2007. Also South Korea and

Taiwan are important emerging actors.

4) Europe is lagging behind in patenting in nanotechnology.

Nanotech Patents by Region of Applicant

Nanotech Specialisation Outside the Triad

Europe`s Position in ICT

1) Europe is behind the US and Japan in IT, but competitive in CT.

2) US and Japan have a technology leadership in ICT patents, but

Europe has been catching up. Still it lacks a broad ICT industry base.

3) USA has a slight lead in converging ICT with biotech and nanotech,

but Europe is not far behind and has a good research capacity in

converging ICT with cognitive sciences.

4) Asian countries are making substantial efforts (South Korea, China,

India). The ICT sector in China is very reliant on foreign-owned

companies.

5) In the field of ICT outsourcing India (first mover), Brazil and Russia

are progressing fast.

Europe`s Position in Biotech and Health Technologies

1) US is leading in life sciences (incl. agriculture, homeland security,

pharmaceuticals), but some EU member states are highly

competitive. EU has strengths in medical devices and drug research.

2) EU produces the largest number of publications in life sciences, but

is lagging far behind the US in patenting.

3) In China life sciences are high on the agenda due to food security

considerations (strong increase in feed grain and oil seed). In India

almost half of the public R&D budget was dedicated to biotech (2002-

2007), esp. medical biotechnology, the development of transgenic

crops for cotton and bioenergy are high on the agenda. Brazil is

positioning herself in genomics and gene sequencing. South Africa is

publishing frequently in virology (AIDS).

The EU‘s Policy Answer to Sustain in Global Competition

(renewed) Lisbon Growth and Jobs Strategy (Partnership

of Growth and Jobs)

Core Objective:

… to secure a prosperous, fair and environmentally

sustainable future for Europe by developing Europe’s

economy and guarantee quality of life for its population.

RTD and innovation support are only the means to an end,

not objectives in themselves.

Approach and Targets

Focus of the Growth and Jobs Strategy is on investments in

the knowledge economy (emphasis on education, research,

technological development, innovation and entrepreneurship).

Targets of the Growth and Jobs Strategy:

-total investment of 3 % of Europe’s GDP in R&D by 2010

-employment rate of 70 % of the working age population by

2010

Funding Instruments

1) Structural Funds and Cohesion Fund to strengthen

economic, social and territorial cohesion by reducing

disparities in the level of development among regions and

EU Member States. RTDI is a major priority (€ 86 billion

or 25 % between 2007-2013).

2) European Framework Programme for RTD (FP7)

3) CIP - Competitiveness and Innovation Framework

Programme

4) and others …

Internationalisation Strategy in R&D

„There is wide consensus that excellence in research stems from competition between researchers and from getting the best to compete and co-operate with each other. A crucial way to achieve this is [...] to work across borders“ (EC, 2008).

The EU does not claim to be a self-sufficient entity in the realm of STI.

Both, Europe’s knowledge resource (e.g. human capital) and its role in the global economy will be increasingly shaped by its ability to source knowledge internationally and to adapt it for its own use!

Internationalisation Strategy in R&D (2)

Globalisation Drivers

• Globalisation of RTD is based on new economic organisation modes and division of labour as well as socio-political (e.g. EU integration) and socio-cultural (e.g. ‚global village‘) factors. The main drivers are – Multinational Enterprises (MNE)– new technologies (ICT; logistics ...)– (de)regulatory measures (opening of markets)– international standards and norms– efficient education systems to provide the Human

Capital for R&D and international exchange of commodities, goods, services, capital, knowledge and information

Internationalisation Rationals for RTD

• Quality acceleration and excellence objective• Market and competition objective• Resource acquisition objective• Cost optimisation objective• Global or regional development objective• Scientific diplomacy objective

Ranges from gradual

improvement to cooperation with the

best! Quicker progress and

enhanced productivity. Professional

advancement. Only the best

institution succeed internationally.

Supporting domestically produced innovations abroad. Support for

innovations generated abroad by domestic

companies. Supporting a quick access to new

knowledge (TT). Absorption and spill-overs are

essential! Access information, knowledge and expertise as well as equipment/facilities.

Technology Transfer; brain gain; gain solvent students; gain funds;

cost sharing to create critical mass;

large scale infrastructures;risk sharingglobal challenges like climate

change, energy, MDGs; research for development; many of the risks have no

frontiers!

to support other policies (e.g. foreign policy; security, ODA,

transport; promotion of domestic competences to

generate allocation effects!

Policies behind the Internationalisation of RTD

Source: Technopolis, University of Manchester und Wise Guys Ltd

Main Strategic Objectives of S&T Policies of EU-MS towards Internationalisation

additional minor quoting: sharing of infrastructures; brain-gain; international relations per se; regional cooperation; improving the own policy-delivery systems by learning from others etc.

0

2

4

6

8

10

12

Increase the quality ofR&D

Raise competition andmarket access

Tackle global issues(incl. development

cooperation issues)

Source: Sonnenburg et al., 2007

Instruments for S&T Internationalisation

Instruments directly targeting researchers• Research Funding• Research Mobility Support• Support for International Research Networks (institutionalised)

Policy level instruments• Foreign Science Offices (unilateral)• Tax incentives for FDI in R&D (unilateral)• Bilateral scientific agreements• Multilateral collaborative programmes (e.g. ERA-NETs, Human

Frontier Science Program)• “Big Science” cooperation (esp. large-scale infrastructures, e.g.

CERN, ESA, ITER)• Cooperation with international organizations • other

Public Policies for International RTD Cooperation

Source: BMBF

Gains from S&T Cooperation

„… the European Research Area has the infrastructures, the universities, the capabilities and the expertise, but it may lack the students in the near future and the engineers in the remote future … A far-sighted S&T policy should therefore ensure that international cooperation with developing countries … paves the way for future transnational cooperation with colleagues and students“ (EC, 2007).

Literature

• European Commission (2008a): A Strategic European Framework for International Science and Technology Cooperation. Communication from the Commission to the Council and the European Parliament. Brussels: European Commission

• European Commission (2008b): Opening the World: International Cooperation in Science and Technology. Report of the ERA Expert Group. Brussels: Research*eu

• European Commission (2007): Europe in the Global Research Landscape. Brussels: Research*eu

• OECD (2008): The Internationalisation of Business R&D. Evidence, Impacts and Implications. Paris: OECD

• Sonnenburg, J., Schuch, K., Teirlinck, P. et al. (2007): Policy Approaches towards S&T Cooperation with Third Countries. Brussels: CREST Working Group on Internationalisation of R&D

Klaus Schuch

Centre for Social InnovationLinke Wienzeile 246

A - 1150 Vienna

Tel. ++43.1.4950442-32Fax. ++43.1.4950442-40

email: schuch@zsi.athttp://www.zsi.at