The Innovation Policy Knowledge Base8 Global Trends and Challenges

Per Koch, Director for Analysis and Strategic DevelopmentThe Research Council of NorwayTAFTIE Conference Annalis’07, Istanbul Nov 28 2007

Challenge No. 1: To shift from a technology push perspective to a vision of learning

The linear model is not deadResearch and technological development in universities, RTOs and companies gives birth to an idea and relevant new knowledge

Companies make use of these ideas in the development of new products and processes

The company brings the new product to the market

The linear thinking lives on in a dominant technology push model

The 3 percent objective is based on a linear model

1. Increase national investments in R&D

2. Produce more knowledge

3. Apply that knowledge to industrial production

4. Result: innovation

5. and wealth creation

There is nothing wrong in having increased investments in R&D as a policy objective, but here it is used as a proxy for innovation

The systemic model of learning and innovation

Knowledge of customer and market needs

In-house learning

Marked knowledge

Tacit knowledge

Acquired technology

Literature

Conferences and fairs

New employees

Commissioned R&D

In-house R&D

market pull

Research is still very important, but is one of many learning tools. Indirect flow of R&D based knowledge and technology.

New or improved products, processes or services

User input

Focus on other aspects of learning

R&D embedded in technology and human capital

Design

Branding

Organisational change

Management practices and types of ownership

A new focus on research as a learning tool

The effects of R&D products on the innovation system

Company profits as result of sales of new or improved products, processes or services

Spillover effect 1: the new products leads to increasing productivity among customers

Spillover effect 2: the new products leads to innovation among customers and suppliers

The effects of R&D on learning in the innovation system

Research builds competences that can be used to absorb knowledge and technologies developed elsewhere

Research may lead to network building

University research teaches students how to use the tools of science

Challenge No. 2: Understanding innovation in “low tech” industries

OECD: ” There is a puzzle about Norway”

”Although measurement is incomplete,

R&D intensity appears weak,

patenting is moderate and

business surveys report a limited interest for innovative activity.

Yet,

the level of productivity is high in the mainland economy and

its trend growth enviable,

showing a capacity to absorb innovation spillovers

and undertake organisational and managerial changes.”

OECD Economic Survey Norway 2007

Differences in industrial structure, 2003

0% 20% 40% 60% 80% 100%

Norway

Sweden

Denmark

Finland

Iceland

Lithuania

EU15

High medium-high medium-low low Primary Other services

Notes: high tech includes telecommunications, software, computing and other business servicesAnd medium-low includes construction and utilities.Source: STAN database and NIFU STEP

Understanding innovation in resource based industries Resource-based industries

may be knowledge-intensive and profitable, but not R&D intensive

Farming, aquaculture fisheries, petroleum and mining

The word “high tech” is misleading, as it refers to R&D as a percentage of company turn-over, and not to the company’s use of advanced technology and knowledge

Resource based companies do not invest much in R&D, but they

may make use of advanced technologies (often developed elsewhere)

and they do employ highly competent engineers and technicians

A lot of process innovation

Little R&D per company, but branches of industry as a whole may invest much (food)

Underreport R&D, as R&D is part of the whole production process

Use of other forms of innovation: branding, marketing

Indirect use of research

MS Kristian With Refrigeration/containership built by Vaagland Båtbyggeri AS on the North-West Coast of Norway

Argon AS has installed the electronics

Radar, satellite phone and TV-antenna delivered by ProNav

Sonar, logg, radio and electronic map systems delivered by Furuno

Gyro compass and autopilot delivered by Simrad

The advanced technology has been “black-boxed”. You do not need to know how to build a TV to watch the Simpsons.

Challenge 3: We need to get a better understanding of the role of services

The largest part of the economy

A very heterogeneous sector

A residual factor (what’s left when we leave out manufacturing and food)

We need a new categorization

Important service sectors

B2C services: non-R&D companies, including retail, people care and tourism

Retail: Innovation in transport, storage, delivery and customer care

Tourism: Innovation in product range, presentation, transportation and marketing

Services as partners and knowledge providers for industry

Advanced knowledge providers, e.g. R&D intensive B2B ICT companies (Knowledge intensive business services)

These companies may compensate for the lack of R&D in others.

Low R&D measurements in some industries may be an effect of outsourcing

Challenge 4: Understanding the effects of public sector innovation

Innovation in the private sector is understood as an investment, in the public sector as an expense

Innovation in the public sector and the effect on industry

Public/private learning arenas

Public procurement

The effect of social welfare on risk taking and company behavior

We have no output indicators!

Company

LearningNetworksinnovation

Customers and users

Suppliers

Policy-institutions

FinancialInstitutions

R&DInstitutions

Consultants

Public policy Cultural framework

International framework Industrial structure

Challenge 5: Understanding competence flows in the innovation system

The role of competence flows

The role of education

User-driven innovation

Customer/supplier relationships

“Open innovation” and industry collaboration

The role of KIBS

The role of public sector institutions

National innovation systems must have porous boundaries.The EU is not competing with the US or Japan. This is not a zero-sum game!

Challenge 6: Understanding the heterogeneity of innovation systems

Norway, Sweden, Iceland, Finland, the Netherlands, Bravaria, Catalonia, Northern Italy and the UK have all successful innovation systems that produces wealth.

But they are all totally different from each other.

Unique historical trajectories.

Unique socio-cultural framework conditions

There is no best practice.

Finland and Ireland cannot be used as models for other countries!

Challenge 7: Understanding socio-cultural framework conditions Stable macro-economic framework

conditions

Disciplined fiscal policy

Competition policy encouraging innovation

Low taxes

An open economy

Socio-cultural framework conditions

Egalitarian culture with high social mobility

High wages for blue collar work gives impetus towards innovation (robots, internet banking)

High educational levels brings flexibility and labour mobility

An efficient public sector helps industry

A trustworthy welfare system reduces risk

Political and social stability gives trust

Challenge 8: Cultural understanding in a globalised economy

Globalisation means that we have a cultural convergence at the same time as we see the birth of a large number subcultures

The Long Tail

International trade requires new language and culture skills

A new division of labor and specialization in the global markets

A new important role for the humanities and the arts

Cultural decoding

THE ENTERTAINMENT INDVSTRY REQVIRES HELP FROM THE ARTS AND THE HVMANITIES

TV series Rome

Understanding and developing sub-cultures

Design and identity: Apple & Jonathan Ive

Challenges

1. A shift from a technology push perspective to a vision of learning

2. Innovation in resource based industries

3. Innovation in – and the role of -- services

4. The effects of public sector innovation

5. Understanding competence flows in the innovation system

6. Socio-cultural framework conditions

7. The heterogeneity of innovation systems

8. Cultural understanding in a globalised economy

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