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Technology Extension: Concepts and International Models
Jan Youtie1
Lanzamiento Informe Nacional de Competitividad 2015 – 2016, Bogota, Colombia November 5, 2015
1. Georgia Institute of Technology, Atlanta, GA, USA Email: [email protected] | stip.gatech.edu | Twitter: @JanYoutie
Overview
1. Introduction – What is Technology Extension
2. Why are Technology Extension Services important?
3. Service examples – How and When?
4. Positioning and Strategy – Where and with How much impact?
5. Practices and Characteristics
6. Key Insights
2 1. Introduction
Recent Studies
21st Century Manufacturing: The Role of the Manufacturing Extension Partnership
National Academy, National Research Council, Washington, DC, October 2013.
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Impact of Technology and Innovation Advisory Services
P. Shapira, J. Youtie. Compendium of Evidence on the Effectiveness of Innovation Policy Intervention. NESTA and Manchester Institute of Innovation Research, December 2013
Institutions for Technology Diffusion: Technology Extension Services – Operation, Cases and Insights
P. Shapira, J. Youtie, et. al., Manchester Institute of Innovation Research and Georgia Institute of Technology. Inter-American Development Bank. June,
2015
Current Studies
Technology Extension Services
• Advice and expertise offered directly to enterprises to improve technology use and innovation
• Linked with management strategy, R&D, training, financial support, marketing, supply and customer relationships
• Targets – often SMEs in manufacturing, but also other types of firms
• “Real services” (Bellini) - engage directly with companies to transfer knowledge and stimulate learning using nonfinancial means
• Diverse forms - also known as “industrial extension” or “innovation advisory services” and can be a component of “business support services” and “applied technology centers.”
1. Technology Extension: What
WHAT?
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Why Technology Extension?
Why Technology Extension needs greater attention:
R&D and patenting alone are insufficient: Most firms do not do R&D, invention does not mean innovation.
Technology diffusion: Economic growth and development is related to the widespread deployment of technology (from own R&D or via knowledge or capabilities brought into a firm or innovation system).
Absorptive capacities: Development is also related to the effective use of technology – requires building up capabilities of people, firms and innovation systems to learn about, use, and improve upon technology
Trade and Competitiveness: Spread of free trade and liberalized markets means
that technology-lagging firms can no longer be so easily protected.
2. Technology Extension: Why
Why?
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Technology Extension Services can be overlooked as policies focus on advanced R&D and selected high technology targets.
There is a case for greater emphasis and integration of Technology Extension Services in the innovation policy mix
The Industrial Future? Faster, more responsive and closer to customers
– Mass personalization, distributed production, new technologies and materials, digitalized value chains
New markets, new competition – Market opportunities in emerging economies yet also increased
competition for developed economies from capable emerging economies
Attention to resilience and sustainability – Supply volatility, competition for resources, climate change,
regulation, consumer eco-pull, life cycle
Dependent on highly skilled workers and managers – Skill and competence will be in demand in context of demographic
change, competition for skilled personnel
Integrated value creation – Integration of manufacturing supply chains, user demand, public-
private manufacturing support landscape
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Adapted from The Future of Manufacturing, Government Office for Science, London, 2013
The SME Foundation
Technology Extension is often targeted to SMEs (Small and Medium-Sized Enterprises)
SMEs comprise the majority of business enterprises in almost all economies – SMEs are key elements in supply chains, also important in driving
innovative regional clusters – SMEs typically lag in productivity, use of technology, wages,
competiveness
Key trends shaping SMEs – Open innovation (Chesbrough 2003) – Flexible specialization (López-Estornell et al 2012, Molina-Morales and
Mas-Verdu 2008) – Globalization and offshoring (Houseman 2006)
Innovation and SMEs and modernization – Many SMEs unable to modernize, develop capabilities, to fully engage
in new pathways for development and innovation
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Technology Extension Services:
Rationales for Intervention
Market failures – Demand-side: SMEs lack information, knowledge, resources to
implement modern methods and new technologies – Supply-side: Large customers, vendors, consultants don’t or can’t
support SMEs; Trade associations weak
Government and service failures – Gaps in public service provision for SMEs
Strategic concerns – Economic competitiveness – maintaining jobs while growing wages; – Rebalancing, expanding exports – Develop supply-chains and clusters, for new rounds of technological
growth – Foster local and regional economic development
WHY? 8
3. Technology Extension Services: How and Where?
Technology Extension Services
Typical service methods
Information provision
Benchmarking and assessment
Technical assistance or consultancy
Referral, links with finance
Training
Group or network services; supply chain development
Collaborative projects (R&D, implementation)
Strategy development; coaching and mentoring
HOW?
9
Institutional Arrangements
• Appropriate organizational context – Range of organizations (e.g., economic development,
research, standards) – Organizational characteristics : dedicated field staff, R&D
centers, and technology-oriented business support – Leveraging partner organizations
• Performance review, termination in partnership agreements
– Smaller regions can be combined
• Core public funding – Mission orientation towards SMEs – Program stability and trust – Pricing as private consultancy will drive program to serve
larger and repeat clients and/or standardized services
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HOW?
Examples of Types of Technology and Innovation Advisory Services
Type Dedicated Field Services
Technology-oriented Business Services
Applied Technology Center Services
Distinctive Rationale
Lack awareness, tacit knowledge
Weak business technology linkages (including finance)
Under-investment in & exploitation of applied R&D
Examples Manufacturing Extension Partnership (MEP) [USA]
Manufacturing Advisory Service (MAS) [England]
Industrial Research Assistance Program (IRAP) [Canada]
Public Industrial Technology Research Institutes (Kohsetsushi) [Japan]
Fraunhofer Institutes (FhG) [Germany]
Tecnalia [Spain]
11 WHERE?
4. Technology Extension Services: Positioning
Positioning
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Source: Shapira et al., 2015
WHEN?
TECHNOLOGICAL CAPABILITY
TES Boundary Issues
• Manufacturing-services:
– manufacturing as a “traded industry” v. manufacturing-plus programs (high value services) v. other goods & services sectors
• Integration
– Of productivity and innovation services (TES core service) with business and marketing efforts (business assistance) and other support services (finance, training)
• Focus:
– Technology v sectoral v regional? Best guidance: reflect the broader needs and makeup of a country’s industrial base
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Monitoring and tracking systems are used (tracking companies served, services provided), e.g. MEP performance metrics
Evaluation methods vary, including customer surveys, case studies, controlled studies, program reviews
Formal evaluations in US, UK, Canada, some other countries – but difficult to track all impacts
TES Program Logic and Assessment
Typical TES Program Logic Model
Assessment
For more on TES evaluation and impacts, See Impact of Technology and Innovation Advisory Services, P. Shapira, J. Youtie. Compendium of Evidence on the Effectiveness of Innovation Policy Intervention. NESTA and Manchester Institute of Innovation Research, December 2013.
Intermediate outputs Capacity for change, changes in practice, improved firm capabilities
MAS Clients, 2002-2005 (DTZ Consultancy evaluation of MAS, survey of clients)
improved productive use of equipment 47%
increased investment in skills 37%
improved just-in-time manufacturing practices 35%
better stock turns/stock holding/delivery 33%
increased space utilization, and 30%
increased investment in capital equipment 20%
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IRAP clients (Goss Gilroy, 2012)
increase in firm’s business skills and knowledge 70%
increase in scientific and technical knowledge 82%
enhanced technical knowledge or capabilities 90%
enhanced ability to perform R&D 62%
enhanced business knowledge/capabilities 68%
TES Services: Assessment and Evaluation 1
Business Outcomes Findings from MEP evaluations
16 TES Services: Assessment and Evaluation 2
Customized services in product development and marketing lead to bigger benefits, routine services for quality and process improvement lead to more modest firm effects.[1]
Compared with non-clients, MEP clients had 3.4%-16% greater growth in labour productivity over a 5-year period in the late 1980s and early 1990s [2]
Two updates to this study, using a comparable methods, found mixed results for MEP’s overall net productivity impacts on assisted firms for 1997-2002, 2002-2007, but did find MEP client establishments 18% less likely to go out of business, MEP services were associated with significant productivity improvements for smaller firms (5% 1997-2002, 1.2% 2002-2007), and certain kinds of services. [3]
1. Oldsman and Heye 1998, Thomson 1998, Youtie and Shapira 1997; 2. Jarmin (1999); 3. Ordowich et al,. 2012, Lipscomb et al., 2014
Broader Economic Outputs Positive economic returns generated
MAS UK [1]
£1.40 – £1.80 of economic benefit was received by firms, on average, for each £1 of public funding (Level 4 consultancy services)
Estimated internal rate of return of 15% – 17% over a five year period).
£155m of additional Gross Value Added through Level 4 and quantified Level 2 services between 2002-2005.
IRAP (Canada) [2]
Benefits of more than 10 to 1 relative to public sector costs – based on multipliers derived from input-output models.
SCALE OF AGGREGATED ECONOMIC OUTCOMES
Small level of effort and resources involved in most TES interactions
Average annual public spend of $3.7K MAS and $9.6K MEP per client. IRAP = more per client (funding as well as technology and innovation advice)
17 TES Services: Assessment and Evaluation 3
1. DTZ (2007) MAS evaluation, 2002-2005 services; 2. NRC and Goss Gilroy, 2007; Goss Gilroy 2012
Program Paradox
Program design o Service Projects Business Outcomes Economic Impacts
o Important but hard to measure and to attribute
Program paradox o Modern complex economies are comprised not just of firms but
of value-chains and networks (including technology centers, manufacturers, services providers, entrepreneurs, investors). Industrial networks need to be “carefully tended to and nurtured”*
o Technology Extension Services have a key role in “convening and connecting” – tending to the network, not only to specific firms.
o Critically important, hard to join up, and really hard to measure
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*The Metropolitan Revolution: Northeast Ohio, adapted by B. Katz and J. Bradley, https://medium.com/where-have-you-been-city-neighourhood-and-travel/8891bb82d83d (accessed January 20, 2014).
ISSUE
Evaluation Balancing Act
Market Penetration
Financial Stability
Client Impact
Evaluation Objectives
Key Characteristics of TES
• Capability to offer field services directly to client firms
• Breadth (including product, process, organizational and management assistance)
• Pragmatic view towards technology and innovation – Often focused on new to firm rather than new to
the market
– Platform rather than industry-specific
5. Technology Extension Services: Practices and Characteristics 20
What TES it is not! Not just about technology transfer from labs to firms
– but about systemic measures to improve firms technological and business capabilities for innovation
Not just about advanced technology
– but about pragmatic improvements in operations and practices, usually with commercially-proven technologies
Not a short-term jobs program
– Results will take time to materialize and require sustained efforts; and some direct jobs may be lost as productivity increased
Not just a government program
– but a process that is driven by industry needs and market opportunities and leverages existing resources
Not a resolution to crisis or radical economic transition
– requires an existing, reasonably stable industrial base
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Key Characteristics of Types of Technology and Innovation Advisory Services
Dedicated Field Services
Technology-oriented Business Services
Applied Technology Center Services
•Core set of highly experienced field staff •Manufacturing
orientation •Delivery of a set of
services that resonate with manufacturing SMEs •Decentralized network
of offices
•Core set of top managers •Small business
orientation •Range of small
business needs, incl. entrepreneurship, finance, business assistance •Decentralized
network of offices
•Mix of in-house, consultants, students •Range of government,
large and small business clients •Primarily contract applied
R&D, testing, material analysis, instrumentation as well as TES services •May use decentralized
network of institutes
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6. Technology Extension Services: Key insights
Defining Technology Extension:
Main Take Away Points
1. Technology extension is assistance provided directly enterprises to
foster technological modernization and improvement
– Particularly at the location of the firm
2. TES focuses on established SMEs
– Many innovation services target high tech firms but a few are designed for
regular SMEs
3. TES is associated with a set of services
– Pragmatic, off the shelf business assistance involving soft and hard
technology
4. Most important, TES is about the sharing of tacit knowledge of
highly experienced/capable field staff rather than any set of services
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Proposition
...an effective set of upgrading, innovation support, and networking mechanisms for small and medium-size firms (SMEs) is one of the foundation measures that nations and regions seeking to improve their economic standing need to have in place.
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Program in Science, Technology, and Innovation Policy
Enterprise Innovation Institute, School of Public Policy Georgia Tech, Atlanta USA
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