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THE KNOWLEDGE DRIVEN ECONOMY
• Knowledge, new factor of production” Drucker P.(1998”From capitalism to knowledge society “in Neef D.
The Knowledge Economy Woburn MA Butterworth) • Knowledge in Production (learning by doing) and
in Consumption (learning by using) • Broadened type of measures, not only R&D• Fostering innovation culture, Setting up legal and
financial framework, Gearing research closer to innovation
• Systemic Approach –Diffusion of innovations- impact on knowledge
Source: Cowan R. Van de Paal G.(2000) Innovation Policy in a Knowledge-Based Economy A MERIT study Commissioned by The European Commission Enterprise Directorate General
Schumpeter identifies innovation as the dynamic "deus ex machina" of capitalism. In his own words (1934):
The fundamental impulse that tests and keeps the capitalists' engine in motion comes from the new consumers' good, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates. (p. 137)
Schumpeter, J.A. (1934). The theory of economic development. Cambridge, MA: Harvard University Press
INVENTION - DEFINITION
THE INNOVATION ECOLOGY AND BREAKTHROUGH DILEMNA
• University-Education – Multi disciplinary• Research Organizations – Not development• Government funding agencies -Alternatives• Technology companies - Risk• Investors• Consumers
INVENTION APPROACHES
Theory driven
Way of thinking leads to invention Einstein
Pasteur from theory to need
Method driven: instrumentation enables previously unknown observations-invention Galileo (telescope) experimental technics-
Data Driven : reveals anomaly in data, a surprising possibility Mendel-burrs –Velcro Fleming-(penicillin)
Need driven: identify problems and seek solutions Edison
INNOVATION DEFINITION
• The ability to manage knowledge creatively in response to market-articulated demands & other needs. (Source: Managing National Innovation Systems, OECD 1999)
• New Creations with Economic Significance
Products what is being produced; Process How goods are produced
Source: Edquist C. & Johnson B.(1997) “Institutions and organisations in systems of innovation in Edquist(ed) Systems of Innovations: Technologies, Institutions and Organizations, London & Washington Pinter/Cassell Academic)
TYPES OF INNOVATION• Product Innovation:The creative development and commercialization of radically new products, often grounded in new technology and linked to unmet customer needs • Process Innovation:The development of new ways of producing products that lead to advantage in cost. • Business Innovation:The development of new business and new way of conducting business that provides unbeatable competitive advantage
Source:Arthur D. Little “ Global Survey on Innovation” in Jonash R.S. The Innovation Premium, Persus Books, 1999 p 114-136
TYPES OF INNOVATION• Product Innovation:Changes in the things (products/services), which an organization offers. • Process Innovation:Changes in the way in which they are created or delivered • Position Innovation:Changes in the context in which they are created or delivered.(Ford, Lucozade drink)• Paradigm Innovation: Changes in the underlying mental models which frame that the organization does,(low cost airlines)
Source:Tidd J. Bessant J Managing innovation John Wiley 2006 p 10
Platform Robust Design Intel PG cyclodextrin detergents odor control Febreze
RESEARCH & DEVELOPMENT
• RESEARCH
Search Planning New Knowledge Non Public Knowledge Future Implementations
• DEVELOPMENT
Implementation Direction Product/Process Improvement Business Objective
THE PLACE OF R&D/INNOVATION
AS A COMPONENT OF GNP
Education
R&D
Innovation
Consumer
Goods & Services
Management
Labor
Capital
New Concepts
Raw Materials
MARKETING HIGH TECH
Source: Mohr j. Sengpta S Slater S Marketing High Technology Products and Innovations Second Edition Pearson Prentice Hall 2004 p 1-16
INITIATING FACTORS TO INNOVATION
Business Objectives• Financial goals• Sales growth• Market Share• Globalization• Material costs-
availability• Shorter Life Cycle• Suppliers initiatives
Environmental Change• Technology• Regulation• Invention• Demography, lifestyle• Customer requests• Rivalry-Alliances
ENTREPRENEURIAL BREAKTHROUGH VERSUS CORPORATE INCREMENTAL IMPROVEMENTS
• Entrepreneurial breakthroughs: unorthodox approach, creativity
• Incremental Improvements: body of knowledge conventional way of thinking
• Edison little schooling. Steve Wozniak Apple, no graduation; Bill Gates, dropped out Harvard, Michael Dell quite university –Dell Computers (Bhide2000 p36
• Large firms: Intel instruction per second grew per 3milion % ; P&G 1250 PhD, 3800 per years 24000 active patents
• Hybrid education?
Source; Baumol W.J.(2005) “Education for Innovation” in Innovation Policy and the Economy Vol 5 National Bureau of Economic Researches
Inventor and Innovator:
Electric suction sweeper : J.Murray Spengler WH Hoover
Sewing machine: Elias Howe Isaac Singer
DEFINITION OF INNOVATION POLICY
• A Set of Policy Actions to Raise the Quantity and efficiency of Innovative Activities
• Innovation Activities Refers to the Creation, Adaptation and Adoption of new improved Products, Processes, or Services
• At the Level of the Firm or the Institution, Local, National
• To Increase Competitiveness: Productivity, Profit or Market Share
Source: Cowan R. and Van de Paal G (2000). Innovation Policy in a Knowledge Based Economy Merit The European Commission p 9
• Tacit & Specialized knowledge• Geographic clustering in knowledge generation• Models of diffusion process: Education system
broader than the industry structure of the innovative industries
• Knowledge Bases. Norwegian offshore and food processing industry Smith K.(1998 Indicators and data for European analysis (IDEA) European Commission )
FOUNDATIONS• From system of production to system of innovation:
backward linkages Learning by doing and learning by searching; Life cycle perspective; Open economy; Quality of Demand
• Home market and economic specialization From innovation interactive process to National
innovation system
• Dimensions: Structure of the system: What are the most developed production and competencies? Institutional set up: How does production, innovation an learning take place?(Freeman C.1995 “History co evolution and economic growth” IIASA working paper 95-76 IIASA
Laxenburg)
• Schumpeterian strategiesPioneers; Adaptionist; Imitators; Complementors
(NaleBuffB.J. & BrandenburgerA.M. (1996) Co-opetition Harpers Collins
London). Danish –(Edquist C. Lundvall B.A.(1993) “Comparing the Danish and Swedish Systems of innovation” in Nelson R.R. National Innovation Systems A comparative Analysis Oxford University Press Oxford
Mixed strategies: Japan Adaptionist, Imitators, Complementors (Freeman C.(1988) “Japan: an ew national innovation system? In Dosi G. Freeman C. Nelson R.R.Silverberg G. Soete L.Technology Chang and Economic Theory Pinter London
Source: Lundvall B.A. Johnson B. Adessend E.S Dalum B.2002 “National Systems of production, innovation and competence building. Research Policy 31(2002) 213-231
• Evolutionary Nature: Paradigmatic Changes, Structural Adjustments (Galli and Teubal 1997); Predictive Elements (Edquist)
• Learning economy:
Short Term economic efficiency
Long Term knowledge efficiency (Jessop B.1999 “The state and the contradictions of the knowledge-driven economy. Development
Research Working papers. Department of Development & Planning )
THE SYSTEM OF INNOVATION-DEFINITION
• The Network of Institutions in the Public & Private Sectors whose the Activities & Interactions, Initiate, Import, modify & Diffuse Technologies. Freeman C.(1987) Technology Policy and Economic Performance: Lessons
from Japan London Frances Pinter) • Narrow Definition-Organizations exploring & Searching
R&D dept., Institutes, Universities; Broader-Economic Structure (Production, Marketing) Lundvall (1992) National Systems of Innovation: Towards a Theory of Innovation
& Interactive Learning London Pinter): Archibugi D. Howells J., Michie J(1999). “Innovation Systems and Policy in a Global Economy’ in Innovation Policy in a Global Economy Cambridge University Press,
• Technological Innovation Edquist (1997) Systems of Innovation Their emergence and characteristics in Edquist C.1997 Systems of Innovation: Technologies, Institutions and Organizations London Pinter (Nelson, Rosenberg –1993 Technological Innovation and national systems in Nelson R.R.1993 National Innovation systems: : A comparative analysis New York Oxford Press
University ). • Institutional Innovation (Lundvall); • Social-Educational Innovation – Freeman (1988 )
Source: Lundvall B.A. Johnson B. Adessend E.S Dalum B. “National Systems of
• Set of distinct institutions which jointly and individually contribute to the development & diffusion of new technologies and which provide the framework with which governments form and implement policies to influence the innovation process OECD (1999)
Source:Metcalfe 1995 The Economic Foundations of Technology Policy: Equilibrium and Evolutionary Perspectives” in Stoneman P. Handbook of the Economics of Innovation and Technological Change pp 409-512 Blackwell, London
SYSTEMS OF INNOVATION
COMPONENTS
FUNCTIONS
BOUNDARIES
OVERALL FUNCTION
Organizations InstitutionsFirms Universities Other services
Standards Patents Support
R&D
Supply ProductionMarketing Education
GOVERNMENT
Interaction
Relation
COMPONENTS Edquist C. & Johnson B.(1997) “Institutions and organisations in systems of innovation in Edquist(ed) Systems of Innovations: Technologies, Institutions and Organizations, London & Washington Pinter/Cassell Academic
• Organizations: Perform activities Structures with Purposes: Companies, Universities, Venture capital
• Institutions: Provide incentive framework. Regulate relations between, Individuals, Groups, Organizations (Patents, Laws). Rate & Direction of innovative activities(Johnson B. 1988 “Institutional approach to the small country problem” in Freeman, Lundvall Small Countries Facing the Technological Revolution, Pinter London New York )
Edquist C.(2001) “The Systems of Innovation Approach and Innovation Policy: An account of the state of the art” DRUID Conference June 12-15 2001
Time-Horizon of agents; Role of Trust, Actual mix of Rationality(Lundvall B.A.”National Systems of production, innovation and competence building, Research Policy 31(2002) 213-231)
• Relations, Interaction between Organizations/Institutions
FUNCTIONS• Overall function: Produce, Diffuse, Use Innovations• Research (Basic, Development); Implementation
(Manufacturing); End Use (customers, process outputs); Linkage(bring together knowledge); Education Liu X.& White S.(2000): “Comparing Innovation Systems: A Framework and Applications to China’s Transitional Context’ Research Policy 2001)
• Create New knowledge; Guide the direction of the search process, Supply resources, Facilitate creation of external economies, facilitate formation of markets Johnson A., Jacobsson S.(2001). “ The Emergence of a Growth Industry:Analysis of the German, Dutch and Swedish Wind Turbine Industries Schumpeter Conference Manchester 2000 )
• Create human capital; create & diffuse technological opportunities; products; incubate in order to provide facilitie; facilitate regulation for technologie, materials & products; legitimise technology & firms; create markets; enhance networking; direct technology & market; facilitate financing; create labour market Johnson A., Jacobsson S.(2001). “ The Emergence of a Growth Industry:Analysis of the German, Dutch and Swedish Wind Turbine Industries Schumpeter Conference Manchester 2000 )
RELATIONS FUNCTIONS / COMPONENTS• Several organizations can fulfill one function (R&D:
firms research centers)• One organization can fulfill several functions:
university provides new knowledge & education• Function and institutions (R&D and governmental
support and educational system) • Institutions & organizations: mutual embedded:
organizations in institutional environment and institutions in firms (book keeping)
BOUNDARIES• Supranational, National, Regional, Sectorial• Spatially(Geographically), Sectorially, Functionally• Public Action from Supply & Demand Side• Deficient functions-system failure: Problems solving Functions missing or inappropriate Organizations inappropriate Institutions inappropriate Interactions or Links inappropriate• Design & Implementation of Innovation Policy
THE STATE-INNOVATION POLICY
• R&D Policy
• Technology Policy
• Infrstructure Policy
• Education Policy
• Regional Policy
NATIONAL SYSTEM OF INNOVATION
Knowledge Generation Diffusion & Use
Country Performance: Growth, Job creation, Competitiveness
Innovation Systems
Environment and Infrastructure conditions
Source: OECD, Managing National Innovation Systems, Paris 1999 p 21-48
ENVIRONMENT & INFRASTRUCTURE CONDITIONS – Institutions & Support
OrganizationsMacroeconomic and Regulatory context
Communication Infrastructure
Product & factor market conditions
Corporate governance & finance
Education & Training systems
National Innovation Capacity
KNOWLEDGE GENERATION, DIFFUSION & USES – Active Organizations
Firm Capabilities & Networks
Other Research Bodies
Science System
Supporting Institutions
INNOVATION SYSTEMS/NETWORKS
Global Innovation Networks
National Innovation System
Clusters of Industries Regional Innovation Systems
LEVELS OF NIS ANALYSIS
Macro Level Macro Clustering analysis
Functional analysis
Meso Level
Sectoral clustering approach
Spatial clustering approach
Functional clustering approach
Micro Level-Firm Other firms
Non market institutions
Interactions among firms, , firms and others, technology diffusion, personnel mobility
SPECIALISATION IN NIS- overall function
Scientific SpecialisationTechnological Specialisation
Export Specialisation
Size Standard of Industrial
Living Specialisation
Agro food Health Computing M.Eng.
AUS. B, DEN B, DN, FR, NL, J, K SW, D
NL D, IT, S UK
Food Pharmaceuticals Computing
AUS, DN, NL B, DN, SW J, USA, UK, NL
FRENCH FINANCE INNOVATION POLICY
B a s ic R e se a rchT ra in ing
U n ive rs it iesR e se arch e rs
T e ch no lo g ica l P ro g ram m esS p a ce , A ero n au tics N u cle a r, T e leco m .
In cen tive to In du s try
M iss io n O rie n te d R ese a rch
R & D B u d g e t R & DT a x C re d it
G O VERNM ENTT yp e tit le h e re
NORVEGIAN SYSTEM OF INNOVATION
G OVERNM ENT'S RESEARCH PO LICY BOARDM in is te rie s , In d u s try & T ra d e , F in a n ce
C h u rch , E d u ca tio n , R e se a rchC o m m itte e o f R e se a rch P o licy
Corporate R&D
P u b lic F u n dsB a n ks
Universities
R e g io n a l D v t F u nd
Research Institutes
E n v iro n m e ntM e d icin e , S c ie nce & Te ch no lo gy
In d u s try & E n e rgyE n viro nm e nt, B io p ro d uc tion
M U n ic ip a lit ie sC o u n ty
PARLIAM ENT
Support Organisations (Venture Capital) &Institutions (Technological Transfer)
G ran ts to F irm s M A G N E TB io tech n o log y
S ate llite C om m u n ica tion
TN U F A
Tech n o log ica l In cu b ators
C H IE F S C IE N TIS TM in is try o f In d u s try
O th er M in is tries
N E TH E R L A N D S
F R A N C E
U .k
U S B IR D
B I N A TIO N A L F U N D S V E N TU R E C A P ITA L F U N D SY O Z M A
O TH E R S
E U R & D F R A M E W O R K P R O G R A M
ISRAEL SYSTEM OF INNOVATION
OCS R&D Grants are available to companies whose projects have been approved by the Research Committee of the OCS. The grants are a percentage (between 30% and 66%, depending on circumstances) of the estimated R&D expenditure. In cases where the government assisted R&D results in a commercially successful product, the developers must repay the grant through royalties.
The MAGNET program allows the encouragement of generic- pre- competitive technological cooperation executed by consortia of industrial companies and academic research institutes.
Multi-lateral Programs
European Union - The Sixth Framework Programme of the European Union's Commission on Science, Research and Development EUREKA - the Israeli Liaison Office of EUREKA CELTIC - The European Cooperation in Telecommunications GALILEO - Galileo is a Euro 4B project managed by the EU and ESA for a new Global Navigation Satellite System
Bi-National Research
India - Second Call for Proposals – India-Israel Initiative for Industrial R&D (i4RD) Finland - Call for Proposals For Joint R&D Projects in Information and Telecommunications Technologies Victoria (Australia) First Call for Proposals – VISTECH FUND - Victoria (Australia)- Israel R&D Cooperation Program France MOU for cooperation between the OCS and ANVAR Second Call for Proposals - Israel-France Industrial R&D Cooperation Program FIRAD - The France-Israel Industrial R&D Cooperation Framework new website
Germany - German-Israel Technological & Industrial Cooperation Maryland / Israel Development Fund (MIDF) NEW!! Maryland-Israel call for proposals Italy - Italy- Israel Industrial Cooperation Programs Sweden - MOU for Industrial Cooperation between Swedish and Israeli Companies Ireland * The Netherlands Portugal Spain USA: BIRD - Binational Industrial Research and Development Foundation USA: USISTC - US-Israel Science and Technology Commission UK: BRITECH - UK-Israel Industrial R&D Foundation Canada: CIIRDF - Canada-Israel Industrial R&D Foundation
India - MOU for Industrial Cooperation between India and Israel China - THE PROGRAM FOR CHINESE-ISRAELI TECHNOLOGICAL COOPERATION Hong Kong - HONG KONG -ISRAEL TECHNOLOGICAL COOPERATION KORIL-RDF Korea-Israel Industrial R&D Foundation (the web site www.koril-rdf.or.kr is under constraction). Singapore: SI-IRD - Singapore-Israel Industrial R&D Fund Multinational Corporations
Technological incubators
Technological incubators are support corporations that give fledgling entrepreneurs an opportunity to develop their innovative technological ideas and set up new businesses in order to commercialize them. The incubator program is applied in all parts of the country, under the guidance and with the support of the Office of the Chief Scientist of the Ministry of Industry and Trade.
The program supports novice entrepreneurs at the earliest stage of technological entrepreneurship and helps them implement their ideas by turning them into exportable commercial products and forming productive business ventures in Israel
Budget
Between US $350,000 to US $590,000 per two years.
Grant
Level of grant: 85 percent of approved budget.
Ownership
Regular Incubators – General manager directives 8.2
Initial ownership in the Project Company is as follows:
At least 50 percent— the developer/entrepreneur;
At least 10 percent— key staff members other than developers/entrepreneurs;
Up to 20 percent— the provider of supplementary financing (i.e., additional to the State grant) for project implementation. (Of course, this may also be the developer/entrepreneur.);
Up to 20 percent— the incubator
Privatized Incubators – General manager directives 8.3
Initial ownership in the Project Company is as follows:
Between 30 to 70 percent— the developer/entrepreneur;
Between 30-70 percent— the incubator (including the provider of supplementary financing)
State Support
1. Incubator Project
The Grant between US $150,000 to US $250,000 per year for up to two years, i.e., total between US $300,000 to US $500,000.
Level of grant: 85 percent of approved budget.
2.
Incubator Administration
Grant of up to up to NIS 729,500 per annum (about $175,000), including the incubator director's salary, administrative expenses, outlays for sorting and studying of ideas, and organizational expenses for project commercialization and marketing.
Results
By the end of June 2004, 806 projects had left the incubators (in addition to the 200 that remained). Of these "graduates," 45 percent have continued on their own steam and 55 percent have been discontinued.
Most of the ongoing projects have managed to attract private investments.
The total private investment obtained thus far is in excess of US $773 million.
The technological incubators have become massive repositories of potential ideas for new high-tech venture funds in the future.
European Union 6th 7th Framework Agreement
An active participant in the European Union’s R & D Framework program since 1996
Israel continues to be active in the 6th Framework Agreement that began in November 2002
Technological Incubator Projects
• 23 technological incubators operate
• 200 projects operate currently
• 735 projects have left the incubators in the last decade
• 54% have received further private investment
Innovation climate in Israel Scientists & Technicians per
10,000 Workers140
83 80
6055 55
45 43
33 33 3225
0
20
40
60
80
100
120
140
Israel US Japan Germany Canada Switzerland Taiwan UK Ireland Italy Singapore Spain
Innovation climate in Israel
PatentsNumber of patents (per 10,000) registered in the U.S.
during 2003
Source: BDI - Business Data Israel
2.98 2.96
2.04 2.02 1.921.74
1.5
0.7 0.68
0
0.5
1
1.5
2
2.5
3
3.5
Israel - An annual increase of 20%
