R&D, innovation and all that - Science and innovation – the policy choices
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Transcript of R&D, innovation and all that - Science and innovation – the policy choices
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STEP – Centre for Innovation Research
R&D, innovation and all that- Science and innovation – the policy choices
Presentation for
Taller 3: Inversión Investigación y Desarollo pública-privada
17 February 2004
at
Palacio Euskalduna
Johan Hauknes
STEP – Centre for Innovation Research
Oslo, Noruega
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Who am I? – And what am I doing here?
Johan who? Research director at STEP – Centre for Innovation Research Policy experience Scientific background and experience
What am I doing here? R&D and innovation policy – stimulating and shaping industrial innovation
and economic development through public policies and instruments But my knowledge of the economy of the AC of the Basque Country … is
meager … so thanks for the opportunity to learn something new
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My expertise
Economics, innovation theory – the knowledge base of industrial innovation policy
Functional evaluation and monitoring of innovation policies and related instruments and objectives
Weak expertise on policy making and policy processes – and the experiencebased core competence coming from long time participation and management of policy processes
Put bluntly:
I’m a researcher – not a policy maker!
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Outline
General issues of innovation, and S&T policies as to the incentive towards enhancing private investments in S&T and R&D
The innovation context – what is innovation? The policy context – how should we approach innovation and
S&T policies? The need of integrative portfolio approaches to S&T policy
formation Lessons and messages for enhanced public and private
investments in S&T
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I am impressed
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Unemployment rate CAPV (%). EUSTAT 2004
Real GDP growth 1981-2001 (annual growth, %)
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1991
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IPI 1990-99 (1995=100)
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1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Transportmaterial
Machinery
Buildingmaterial
Metalconstruction
R&D indicators
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1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
0.00
0.20
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Total (M€) Per capita (€)
GERD/GDP(%)GERD/GDP (%)
0.50
0.70
0.90
1.10
1.30
1.50
1.70
1993 1995 1997 1999 2001
Norge
CAPV
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R&D indicators 2001 EAE Norway Spain EU
GERD/GDP (%) 1.44 1.60 0.96 1.93
Company funded GERD (% of GERD) 66.1 51.1 47.2 56.2
Public funded GERD (% of GERD) 26.5 39.5 39.9 34.5
Foreign funded GERD (% of GERD) 7.3 7.2 7.6 7.8
R&D personnel (FTEs) - total 10,619 27,108 125,750 1,719,074
R&D personnel (FTEs) - ISCED 5A+ 5,807 20,077 80,081 971,497
R&D PYs/active work force ('000) 11.3 11.3 7.0 9.9
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Does R&D deserve public support? Little systematic evidence – lots of anecdotal evidence Probably high social returns to R&D – though hard to estimate
“Guesstimate”: 50-70% marginal gross rate of return, despite mechanisms that can induce overinvestment in private R&D AND incentives for rent seeking behaviour by private investors and firms
Appropriating the full returns for the investor is difficult (impossible?) Social returns exceeds private returns by a wide margin Intellectual property rights are important
RTD generating complementary social assets The structure of technological knowledge
Receptive and formative capacities in the economy Social returns are generated in exploitation and utilisation of technological
knowledge
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So what can we say of R&D and economic growth?GDP growth - R&D
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0%
Real GDP growth 1994-02
GE
RD
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P 1
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1-9
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Recent European Initiatives
The Lisboa strategy – knowledge based competitiveness
ERA & S&T policies – the European Research and Innovation Area and the 6th FW programme
The Barcelona goals – 2+1% GERD/GDP
The Growth Initiative – TENs and large scale R&D projects
Life Sciences and Biotechnology a strategy for Europe
White Paper on Space Policy
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In the final years of the XXth century we entered a knowledge-based society [depending] essentially on … the production, acquisition and use of knowledge.
Scientific research and technological development … are at the heart of what makes society tick. … research and technology provide one of the principal driving forces of economic growth, competitiveness and employment.
… the XXIst century … will be the century of science and technology.
Towards the European research area, COM(2000)6
What does this mean? The policy view
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There are severe shortcomings with this discourse These shortcomings are, however, seen as “R&D
paradoxes” or anomalies rather than challenges to our interpretation of economic change.
It is now more necessary than ever to search for a proper understanding of what kind of competence and knowledge formation activities that matter and why and how they matter.
That is, what are the key activities contributing to long run growth and employment - and how should we identify and label them.
What does this mean?
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are seriously flawed as core
descriptors of economic change and
core dimensions for political prioritisation in improving society’s efficiency in its resource use
Standardized definition of high-tech has the consequence that all advanced economies are dominated by low- and medium-tech industries
Innovation policies are potentially extremely important to growth – but there are no simple cures
Concepts such as high-tech, knowledge-intensive industries and S&T base
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The point at this stage
is not that technology, R&D and innovation is not important On the contrary! They are probably VERY IMPORTANT Sustaining innovation performance is complex for business
firms – Sustaining innovation performance and impact for an economy is a much harder task
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What can you do?
Enhance R&D performance in existing firms Short to medium term perspective Volume, efficiency or effectiveness? – relating R&D to the market nexus of
firms Learning non-performers to R&D What forms – technology producing vs. technology exploiting
Expand R&D intensive industries Managed structural change – medium to long term perspective R&D performance in all countries and regions is skewed (80/20 rules) Large share of R&D organised by MNEs
Generate new firms/industries of R&D performing industries Long term impact Uncertainty New globalised divisions of labour – the case of biotech
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Innovation is bootstrapping
Innovation is at the core of what makes economic systems change
The argument is not that new & old technologies matter - but how and why they matter and how they are shaped by economic agents
The core issue here is our understanding of knowledge, learning and productive competences – and the role of RTD in these
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What is innovation? Innovation is the essential characteristic of the life of a firm
A firm without innovation is a contradiction in terms
Innovation - any “new ways of doing things in the way of economic life” – is basically defined as any deliberate changes in economically related behaviour
Distinguishing between relevant and irrelevant to analytical questions on objectives and aspects of innovations to socio-economic questions on objectives and aspects of innovations
is a task for the analyst to make – not the economic agent.
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What is innovation? – What was the question?
The MBA question: Innovation creating Attacker’s advantage
The Policy question: The long term viability and sustainability of ‘wealth creation’
The Economics question: Resource allocation and structural change in production and economic systems
The Statistics question: Standardized indicators mapping industrial dynamics (Where’s the beans, and how may I count them?)
The Marxist question: Innovation and Capitalist development
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What does the innovating firm do?
Compete!
But how?
Doing same things more efficiently – “internal” innovations – or doing different things – “external” innovations
Innovation is simple – and complex The Anna Karenina principle – successfully innovating firms
are all innovating the same way, while every unsuccessful innovator and non-innovator is unsuccessful in its own way
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Economic competences and capabilities – the underpinnings of innovation Economic competences – the abilities to generate,
identify, expand and exploit business opportunities – is the basis for economic ‘action’
strategic capabilities
organisational capabilities
functional capabilities,
market capabilities
capabilities to learn
This is where its R&D efforts are focussed
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What does all this mean?
Innovation is a market phenomenon
Innovation’s rationale and consequences in the nexus between the firm and the market environment
This implies a market logic for what incentives work and what their impact is
And what inclinations – or fields – of innovation are relevant to the socio-economic questions addressed
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Market dynamics
Technological
Rapid Slow
Rap
id
Highly interdependent techno-
economic dynamics
“Critical system”
Punctuated change
“Schumpeterian gales”
Pri
ce r
elat
ed
Slow
Innovation led competition with co-
existing varieties
“Innovation economy”
Highly interdependent dynamics
“Critical system”
Stone Age Economics
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What is innovation policy
Policies affecting the intent, orientation and extent of the innovation activities of firms and other economic agents Public objectives and initiatives that shapes and forms
economic agents’ – producers, distributors, financial investors and mediators, consumers etc.) –
development and implementation of new ways of behaviour in their economic activities
with the intent of ensuring and enhancing their appropriation of pecuniary, social or cultural returns and goal achievements – based on agents own objectives and intentions – of their economic economic activities
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Innovation policy = Welfare policy
The overall objective of innovation policy is general social welfare
These policies are requisites for attaining high levels and distribution of income and income generation capacity
through refining and utilising available socio-economic resources cost-efficiently
At the core innovation and RTD policy is very simple appropriation – IPR systems diffusion and spillover – industrial espionage
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Innovation policy = Wider economic policy
The core objectives of economic policies is to ensure socially beneficial factor supply factor utilization factor efficiency distribution
Industrial S&T and RTD policies is a core part of this RTD at firm level = problem solving RTD at social level = enhancing factor supply and efficiency
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Why innovation policies? Two rationales
Innovation performance as major determinant of economic growth Facilitating innovation Strengthening incentives to innovate Two types of policy
policies concerned with resources and incentives taking technological possibilities and capabilities of firms as given by changing marginal returns to [innovation]
policies to change and enhance the innovation possibilities that firms face by improving their access to knowledge and by improving managerial capabilities
Social objectives otherwise unattained by commercial firms Shaping innovation Altering incentives to innovate
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Implications With this view of innovation and technical change, there is no longer any
well-defined optimum allocation of resources There’s good practice, not best practice
Policy development must be based on informed use of theory, information and subjective judgement the explorative policy maker the adaptive policy maker the integrative policy maker the contextual policy maker the learning policy maker: systematic policy learning
This alters the requisite policy capabilities and competencies of policy makers It is not that firms know better than policy makers, it is that they know
differently
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Systemic innovation – three insights
Innovation is a main explicant of the dynamic evolution of market systems
Innovation is multi-functional; and involves a recombination of factors from various dimensions of firms’ functions and activities.
Innovation is shaped by interactions between the firm and its institutionalised surroundings – the techno-economic environment of the firm
Innovation is a dynamic microlevel process involving mutual and multi-functional interactions with a varied, and organisationally structured, socio-economic environment
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Richer, simpler and more difficult innovation policies Simpler:
Emancipation from market failure rationales of innovation and RTD policies, with their conflation of the objectives of public policies with a fictitious benchmark of perfectly functioning markets
No single critical missing factor
More difficult: Innovation policy challenges are much more indirectly related to the
actual unfolding of industrial innovation More open-ended and framework enabling policy objectives than
oriented towards specific technological or economic objectives Targetting social objectives is paramount No quick fixes Long term
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The policy messages
Design of innovation incentive structures at the microlevel to ensure the fulfillment of social needs and objectives
The core goal is generating economic variety S&T infrastructures are particularly important, and must
continue to rely on public-sector support Potentially strong externalities and spillovers from public
provision of R&D support Needs of focus on bridging and receptive capacities to ensure
this Use macroeconomic, competition, monetary, education policies
to shape innovation incentives
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Policy issues – the information view
Information generation – new competences, new knowledges Information emission – open and competitive environments Information transmission network – ensure distributive
capacities of economic systems Information transmission signal quality – standardisation,
certification etc. Information absorption – build up receptive and interpretative
capacities of firms, Power supply – adaptive supply and receptivity of RTD
systems: Ensure flexible and sustained contribution and interaction with a
public regulatory systems as well as systems of S&T institutions, institutions of higher education and so on
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Lessons learned
The overall objectives of innovation policies are milestones – on the way towards more basic goals
It requires understanding of the wider political and social goals and objectives they are expected to realise
It is not a question of pro et contra for specific policy instruments – choice of instruments is a choice of tools; they can do a job easier – or more cumbersome Innovation policy objectives are complex – goals for individual tools and
instruments should be made simple
Thus, the design of policy instrument portfolios – of “policy mixes” – is essential – Innovation policy must be based on a portfolio approach
Policy learning – systematic analysis and exploitation of experience etc. of the requisites, design and implementation of innovation policies at portfolio level – is crucial
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The focus of innovation policies Innovation systems are social systems
habits, practices and rules of social actors participating Social systems are dynamic and open
influenced irreversibly by external factors they are path-dependent system ‘logic’ is locality specific,
strongly contingent on local socio-economic history
Firms never innovate in solitude To successfully innovate, companies are dependent on complementary
knowledge and know-how Innovation is an active search process to tap new sources of knowledge
and technology and apply them to products and production processes
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What does system approaches to economic systems emphasiseThe importance of denseness – complementary activities proximity – access to and richness of interaction openness – agility and adaptability competitionalong all relevant dimensions market related dimensions socio-technical dimensions socio-geographical dimensions
Generalised “cluster approaches” help capturing important complementarities
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Policy vectors and instruments
The overall objectives of innovation policies are milestones where the choice of specific policy instruments is a choice of tools; they
can do a job easier – or more cumbersome
Innovation policy objectives are complex – goals for individual tools and instruments should be made simple
RTD policies and goals form a set of such tools – albeit an important part
Thus, the design of policy instrument portfolios – of “policy mixes” – is essential – Innovation policy must be based on a portfolio approach
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Towards a taxonomy of policy instruments Direct vs. indirect instruments
Direct instruments are targetted at the agents where the impacts are to be generated
Indirect instruments are providing offers requiring further unilateral decision by the agent to access
Generic vs. specific instruments Generic instruments apply to all agents in a defined population Specific instruments apply to agents in this population satisfying predefined
criteria Distinguish between eligibility and functionality
Rightbased vs. competitive instruments Right-based apply to all firms/agents satisfying a set of minimum standards Competitive instruments – selective among eligible applicants
Intraorganisational vs. interorganisational orientation (Inhibiting) Regulatory vs. (enabling) infrastructural measures
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Towards a taxonomy of policy instruments
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Industrial RTD support
Disincentives
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Task: Design a portfolio of policy instruments to enhance S&T investments and impacts in the economy What are the targets? In which industries and sectors of the
economy? What is the role of S&T and RTD activities in these? Design supplementary (dis-)incentive systems that rephrase
and integrate socio-economic objectives into the market related incentives of the firm
by designing an appropriate and complementary set of policy instruments
that incorporates systematically all relevant activities and organisations
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S&T policy portfolio design
Focus particularly of bridging functions and the associated translatory systems for the parties bridged – the Triple Helix
Consider explicitly the interaction of economic, technological and locational complementary groups of firms, industries and related factor inputs
Count in relevant costs and losses of transformation process Be especially aware of the substitution effects of instruments
and targets implemented Do not rely heavily on pecuniary benefits to companies
Policy and authorities
S&T institutions Industry – economic
production
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Enhancing RTD performance in “advanced” technologies Challenge 1: Globalized markets Challenge 2: Structural change Challenge 3: Techno-economic scales
Loco-motive goal? Ensure localization advantages Adaptation of localized factor inputs –
design relevant “high technology” research programmes and S&T institutions Ensure factor mobility Competitors and complementary industries Localize leading customer base
Spillover goal? Ensure bridging systems Focus economic complementarities Ensure use-oriented RTD and sustained development of receptive capacities Enable bridging of “high technology” to techno-economic competences Enable receptivity oriented RTD programmes and S&T institutions
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S&T policy design But most important:
Experiment – and document!
Consider what you are good at!
Be a demanding customer of business!
Have patience!
Make sure you fail!
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And now for some conclusions
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How to increase public and private investments in R&D?
O1. Things take time (to happen): Stick to your goals The stability of public policies related to R&D activities building confidence and
long-term commitments in R&DO2. Understand the context and your vulnerable points
Large companies remain essential actors in R&D funded by the private sector: links between large companies and SMEs are important
O2. Ensure checks and balances between stakeholders The problems of the use of public money where private investment would have been
done anyway needs to be addressedO4. Make RTD spill over easily
Long-term co-operation among R&D and innovation actors is fundamental to increase R&D investment and to improve its effectiveness. Promote networking
Location (denseness, proximity) may be an efficient way to increase R&D investment from the private sector and to invest public money. Focus of S&T parks (Bridging)
O6. Focus receptive capacities of local systems explicitly Highly skilled human resources become a crucial factor in stimulating R&D
activities and innovation, particularly in SMEs linked to traditional sectors – Receptive capacities
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How to: Efficient and effective use of resourcesO9. Build interactive bridges
Collaborative public-private and private-private partnership R&D projects are an efficient way to improve and to avoid duplication of effort
O10. Be serious about what you want Design appropriate goals and indicators, relevant for the long term industrial
objectives set. Short-term priorities should be designed as check points – not as goals by themselves
O11. Build institutional and functional bridges Ensure strong interaction between higher education, scientific research, bridging
institutions and other infrastructures through specific policy measures.O12. Build receptive capacities
In the long run, investing in human resources and other intangible assets appears much more efficient than investing in tangible infrastructures to improve the absorption rate of advanced technologies.
O14. Integrate and involve other policies – share responsibility Public R&D and innovation policies must be integrated with other policies. Close
co-operation among decision-making instances or even integration should be explored to guide prioritisation processes and to better exploit synergies.
O16. Make sure you learn, explore and adapt Systematic evaluation and monitoring and development of extensive and appropriate
indicator systems is important. Evaluation is primarily a tool for exploration and learning, not for administrative control and cost/benefit analyses
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How to: Work through the behaviour of major players
Shape supplementary incentive systems – and be serious about it
O17. Private policies on R&D investments are always based on effort-benefit trade-offs. Enhancement of technology appraisal capacity as well as understanding of societal needs by the authorities is needed. This calls for the participation of all stakeholders (scientific community,
business sector, administration and society) in priority setting
O18. Facilitate co-operation, boost diffusion and uptake of knowledge by increasing the efficiency of the resources used. Create critical mass and enable take-off
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Summary – some main messages Innovation and industrial S&T policies are important Focus microlevel incentive structures – ensure social
additionality The checks and balances Start from a point of strength Build systematically up receptive capacities
The policy system’s receptive capacity The S&T systems receptive capacity The industrial system’s receptive capacity
Enable systematic policy learning and experimentation The dilemma of small open economies – be specific without
picking winners Focus factor supply, mobilization and utilization
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Zvi Griliches: This response is probably too long, reflecting the fact that I do care about the issue, and possibly that I am not entirely sure how good my arguments really are …(JPE 1994)
Thank you!