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Technological Capacity Building of SMEs in Sub-National Innovation System. UN-ESCAP Beijing, China Oct. 2006 Deok Soon Yim, Ph.D. Director Daedeok Innopolis Office, Korea. - Contents -. Conceptual Framework Needs for New SME Policies Daedeok Innopolis Case Conclusion and Discussion. - PowerPoint PPT Presentation
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1
Technological Capacity Building of SMEs in Sub-National Innovation System
UN-ESCAP
Beijing, China
Oct. 2006
Deok Soon Yim, Ph.D.
Director
Daedeok Innopolis Office, Korea
2
- Contents -
1. Conceptual Framework
2. Needs for New SME Policies
3. Daedeok Innopolis Case
4. Conclusion and Discussion
3
Individual level Laboratory level Corporate level Industry (sectoral) level Regional level National level Global level
Innovation at different innovation actors
Conceptual Framework
Different Innovation Factors
4
Source: Deok Soon Yim (2002)
Value Chain of Innovation Process
HRD, Information, Consulting, Financing
Primary Value
SecondaryValue
R&D
Knowledge Transfer & Application
Market
Conceptual Framework
5
It’s a System for innovation which is composed of actors, processes, and culture. Input Process Output Actors Interaction mechanism between
actors(relationship) S/W like culture, regulation, norms
Concept of Innovation System
Conceptual Framework
6
Concept of Innovation System
1. Innovation processes are related with
multiple actors University, public R&D inst., industry Community, financial inst., consulting firm,
culture
2. Innovation processes are
non-linear/networked interaction about S&T knowledge, R&D, Money, people Business development
Conceptual Framework
7
Concept of Innovation System
3. New role of innovation actors University: basic research + commercialization
too public R&D inst.: basic/applied research +
commercialization Industry: applied research/business + basic
research too
4. Emergence of innovation cluster Networked actors’ web Cluster(innovation system) is more than the sum
of individual parts
Conceptual Framework
8
Government
Research
Institutes
Universitie
s
Industrie
s
Financial Institutes
Other related Actors
Knowledge, Money, People
National S&T
Environment
Global S&T Environment
National Innovation System
Conceptual Framework
9
Actors: Government, Industry, University, Financial Institute, Management Consulting Firm
Input: Money, People, Knowledge Output: S&T knowledge --> Competitiveness Government failure vs. Market failure vs. System
failure External and Internal Environment is important
National Innovation System
Conceptual Framework
10
Environmental Changes
1. Fast Changes of Science and Technology Breakthrough technologies requires everything
to be changed from business, people,
management etc. Speed also matters
2. Globalization MNCs are leading global value chain process Innovation process is also being globalized
3. Increasing Competition Not only MNCs but also SMEs are competing at
global market Core competence comes from technology
New SME Policies
11
Traditional SME Policies
1. SME policies were made in the old context Stable environment Domestic market and competitors
2. Functional, individual policies HR supply, financial, marketing support Low level technological support
3. Short-term oriented Not focused on long-term technological capacity
building
New SME Policies
12
Needs for New Paradigm
1. SME policies in the new environment Changing S&T, globalization, technological
capacity building
2. Comprehensive policies System building rather than functional
policy
3. Short-term oriented Long-term and consistent policy
New SME Policies
13
SME Policy at Sub-national Innovation System
1. Sub-national Innovation System(SIS) is a
small NIS It has common characteristics of NIS It is influenced by national policy
2. SIS is local/regional based The effectiveness of SIS depends on local
conditions It is influenced by local policy
3. SMEs are important actors in SIS SMEs employ people SMEs create local value
New SME Policies
14
Daedeok Innopolis
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Overview of Daedeok Science Town 1973. Nov. (Plan Announced) Establishment
Daedeok, Chungcheongnam-doLocation
27.8 Km² 70.5 Km²Size
23,558 (6,236 Ph.D.s) as of 2005Employment
IT (40%) BT (14%) Material Science (9%) Chemical Engineering ( 8%) Energy resource (8%)
Major Research Area
Total 242 organizations including 21 Government Sponsored Research Institutes 39 Private Research Institutes and 148 Ventures
TenantOrganizations
Mecca and symbol of Korea’s Science and Technology Economic and industrial growth Benchmarking model for developing nations
Status
Daedeok Innopolis
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Major Characteristics of DST Central Government Initiated Driving Force
Government Research Institute + KAISTMain Innovator
Spin-offs from GRIs Technology-based ventures Approx. 800 companies
Start-ups
No (Physical or Operational) Master Plan Island Approach (No community Zone + Separation from surrounding region) No Initial Regional governmental support
Master Plan
Very low becoming active Formal and informal groups
Interaction among actors
Special R&D Zone (2005) Introduction of New Management Body Cluster-supporting Projects
New legal status
Daedeok Innopolis
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How does an innovation cluster evolve?
Stage Characteristics
Pre-Cluster Few firms with very limited links among themselves. Little
economic impact. Anchor companies emerging in region.
Emerging
Cluster
Firms creating links and organizing among themselves to form
industry associations and alliances.
Expanding Cluster
Growing linkages and critical mass. Economic impact
expanding. Networking is spontaneous.
Restructuring Cluster
High inter-firm links. Cluster spawns new cluster-ettes and
begins to adapt in changing market.
Source: SRI – What economic clusters are and why are they important?
Daedeok Innopolis
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Is innovation cluster evolved or developed?
Artificial cluster natural cluster? Can artificial cluster survive without external continuous
support? Example?
Value Chain Can any firm has all the strength in all value chain? Strength in some value chain only? Is it possible to extend the strength in one value chain to
other value chain?
Daedeok Innopolis
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Evolutionary Process
Initial Conditions Location, Technology, People, Culture, Venture
Capital and Consulting Firm, Other Infrastructure
Down-stream Evolution (Yim, 2000) From Production to Research
Up-stream Evolution (Yim, 2000) From Research to Production
Daedeok Innopolis
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What are the factors influencing the formation of an innovation
cluster? Historical circumstance
Unusual, sophisticated, or stringent local
demand
Prior existence of related supplier industries
Innovative companies
Daedeok Innopolis
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Kuro industrial complex Innovation cluster ?
Production Complex (1970)
Kuro Digital Complex (2006)
Daedeok Innopolis
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Initial Conditions and Development
Central Government Initiated Government Research Institutes Focused Initial Condition
Nothing and Planned Locational Advantages
Middle of South Korea. Distance? Small market
Pure S&T Island Approach Down-stream Evolution Process?
Daedeok Innopolis
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What Daedeok Science Town has done
S&T Knowledge
S&T Manpower
Venture Incubation
National S&T Infrastructure
Promote S&T Culture
S&T Outcomes Socio-Economic Outcomes
Visible
Outcomes
Invisible
Outcomes
Daedeok Innopolis
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Examples IT: PC, TDX, CDMA, ATM exchange (ETRI) BT: The research on DNA characteristics (KRIBB/KRICT) Energy: Korea's standard atomic reactor (KAERI) ST: leading-technology air crafts, artificial satellites (KARI)
S&T Knowledge
KAIST: 10% of total 20,000 Science Professors 20% of 6,400 private company researchers
S&T Manpower
Build and Service over 55 Million R&D Information Database: Over 56 Million Users Annually (KISTI) Setup and Maintain Industrial Standards (KRISS) Provide Mega Research Equipments (KBSI) Sponsor Research Projects and Funds (KOSEF)
S&T Infrastructure
18 Venture Incubators (310 Residence firms) Assist Spin-offs and Start up companies (total 158 ventures) Contribute to regional economic development
Venture Incubation
Create S&T friendly Atmosphere (EXPO, National Science Museum) Promote Public’s Understanding on the Importance of S&T
S&T Culture
Daedeok Innopolis
25
0
5000
10000
15000
20000
25000
DomesticUtilityInternational
97 98 99 00 01 02 03 04
• Patents • Venture Companies
0
100
200
300
400
500
600
700
800
900
00 01 02 03 04
Certified
Notcertifiedtotal
ccz
Early Stage of Innovation Cluster:
“S” innovation curve
Daedeok Innopolis
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Many internal/external networks formed Small scale clustering Dedicated internet newspaper Collaborative/open culture International network World Techno-polis Association
Early Stage of Innovation Cluster:
“S” innovation curve
Daedeok Innopolis
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• Response to the Development of Advanced Technologies
• Utilization of the S&T output
• Promotion of Venture Start-ups
1973
1978
1993
1999
year
Innovative capability
Construction of
infrastructure
•Leading the National R&D Capability through GRIs
Expansion of R&D Base
Creation of
Innovation
Formation of Innovation
Cluster
•Promotion of Mega-Sized R&D Projects
•Assistance to Corporate R&D Activities
• Emphasis on Development of Advanced Technologies • Focal Points for the Linkages between Universities, Industries, and Research Institutes
Changing Roles of Daedeok Science Town
Daedeok Innopolis
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Primary ValueFunctions
ProductionProduction MarketingMarketingR&DR&D
Secondary ValueFunctions
R&D ability is the key function and
driving force of an industry value
chain
R&D Driven Innovation Cluster
Human Resources / Information SupplyVenture Capital / Consulting / Etc.
Daedeok Innopolis
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-International Recognition-Geographical Expansion-Linkage with Surrounding Clusters-Reinforcement of Transportation-Technology Driven Economy
-Economic Recession-Gov’t Support for other Regional Clusters-Increasing Overseas Competition
-Lack of Self-sustainability-Lack of Interactions/Networking-Immature Business Environment-Lack of International Business Environment -Brain Drain
-30 Years R&D Experience-Human Resources-Hi-tech Ventures based on Advanced Technology-Support of Central Government-Locational Advantage-Excellent Research Environment
Strengths
ThreatsOpportunities
Weaknesses
SWOT Analysis
Daedeok Innopolis
30
What are the development factors of DST?
First, strong government support A recent financial crisis in 1997 and
following restructuring process with
venture boom Introduction of Local self-government
system in 1995 Introduction of Daedeok Innopolis Office
Daedeok Innopolis
31
Zhongguancun : Market + Being Global
Daedeok Innopolis
32
McDonald: Global Player
Daedeok Innopolis
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Starbucks: Knowledge Place
Daedeok Innopolis
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Conclusion and Discussion Strong government commitment
Importance of system (not individual or individual unit) and competitiveness
Benchmark developed countries but create its own policy
Policy changes according to industrial development (From S&T to industry and innovation)
S&T think-tank to assist gov’t policy
Conclusion and Discussion
35
Transition to open system internationally and cluster-upbringing system domestically
Source: Young Ja Bae, Wi jin Song, Deok Soon Yim(2002)
From system formative Pperiodto system Developmental Period
Global Innovation System
Changes in Technologyenvironment
Changes in Social environment
National Innovation System
Regionnal Innovation
Cluster
Conclusion and DiscussionConclusion and Discussion
36
Conclusion and Discussion
Integrate regional innovation system to national innovation system and finally to global innovation system
Global division of roles at global innovation system
All the innovation policies have to be made at the global level
Conclusion and Discussion
37
Is the Gov’t support really necessary?
1. Then how long and how much?2. Does it take long time to be developed as
a self sustainable innovation cluster?3. It may depend on the location specific
characteristics (Technological capabilities, Good universities, Refined and big market, Venture capital, and etc.)
4. For the artificially designed innovation clusters (without satisfactory initial conditions for innovation), the infant R&D capabilities would soon die out if there is not consistent support form the Gov’t.
Conclusion and Discussion
Conclusion and Discussion
38
Key Success Factors for the Development of Sub-national
Innovation System
1) Research Capabilities
2) Research/Business Manpower
3) Research/Business Infrastructure
4) Financial Resource
5) Cooperative/Competitive Culture
6) Management and Vision
7) International Player (MNC)
8) Start-up Companies
New SME Policies
39
SME Policies at Sub-national Innovation System
1. Strategic Mind Setting Awareness for the importance of SIS in SME
policy It’s matter of survival not selection
2. Long-term, System-oriented Policy The policy may take longer time to bring the
results but has to be consistent and system-
oriented
3. Technology Capacity Building It may need benchmarking case Policy should encourage the co-work between local
university and SMEs
New SME Policies
40
Thank You!
Any Question?