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Patterns and characteristics of innovation in the ICT sector lessons from successful catching-up economies
 

Patterns and characteristics of innovation in the ICT sector lessons from successful catching-up economies

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Expert Group Meeting on Investment, Research, Development and Innovation the ICT Sector ( Tunisia, 7-8 May 2013) ...

Expert Group Meeting on Investment, Research, Development and Innovation the ICT Sector ( Tunisia, 7-8 May 2013)
Abstract
The presentation uses the concept of sectoral innovation system and argues for the importance of analyses conducted at sectoral level, because there are significant differences across economic sectors in the variables and mechanisms involved in catch-up.

Drawing on empirical evidences from research the presentation shows how innovation differs across sectors in terms of sources and patterns of technological change, appropriability conditions, knowledge base and accumulation of knowledge, and last but not least organizations and actors involved. A strong emphasis will be put on how the ICT sector differs from other sectors.

The second part of the presentation first discusses the common factors affecting catching up in six economic sectors – Telecommunications, software, automobile, pharmaceuticals, semi-conductors and agro-food- in several catching-up economies such a Brazil, India, China, Taiwan and Korea. It moves then into discussing the differences across sectors explains how the ICT sector (Telecom and Software) compares to the other sectors.

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  • Le plan de développement des cités de l’innovation prévoit, dans sa première phase, de lancer en 2011 la réalisation de 4 cités de l’innovation en partenariat avec les Universités . Citer les villes concernées par la première phase.
  • In  As Time Goes By: From the Industrial Revolutions to the Information Revolution , a seminal work in cliometrics—the study of economic history—Chris Freeman and Francisco Louçã use historical data on technological advances, economic structure, salaries, and political unrest to derive a clear pattern linking innovation to the performance of the economy. These generational cycles of invention, expansion, and depression are called “Kondratiev waves” in honor of Nikolai Kondratiev, the Russian economist who first postulated their existence. Cliometrics was founded in 1960 as a response to the simplistic models of neoclassical economics. By combining historical facts and economic theories, cliometrics seeks to create a fuller picture of economic growth than either discipline alone can provide. Combining the quantitative field of economics with the qualitative study of history leads to conclusions that may not always fit squarely under the methods of either discipline, but nonetheless the exercise tosses up some intriguing conclusions. Here are several of them. Kondratiev waves carry transformational technologies into the market and create new industries When we think of the industrial revolution, we think of steam engines and factories, but in fact, this was only one of many industrial revolutions. Freeman and Louçã show the correlation between repeated technological revolutions and the waves of economic growth that carry them. Each of these Kondratiev waves is driven by a “carrier-branch technology,” defined as a new way of doing things so much more efficiently than the old ways that it reshapes every aspect of the economy. The five carrier-branch technologies that Freeman and Louçã identify are: Water-powered machinery Steam power Electrification The internal combustion engine Computerization Carrier-branch technologies have a core input, for example coal, or iron, or oil, or computer chips, and give rise to a whole secondary economy of supporting industries and social institutions. And each Kondratiev wave follows a similar economic pattern—the initial invention creates a period of boom, with rising material wealth, but as the technology reaches a point of saturation, the economy enters a downswing or “crisis of structural readjustment.” These upswings and downswings in the past lasted from 20 years to 30 years each, leading to a total cycle time of around 50 years. Similar patterns can be seen with the other Kondratiev waves, but I would like to focus on the one that we are most familiar with, having lived through it. Computing and information technology have driven unprecedented productivity gains in the U.S. economy and underpinned much of recent growth. The dawn of the computer era can’t be precisely pinned down; good arguments can be made for the creation of ENIAC in 1946 or the integrated circuit in 1959. But I prefer the mid-1960s, with the first standardized commercial computers, such as the IBM S/360 and DEC PDP-8. Like the steam engine it took a little while for society to recognize the value of a new transformational technology. The astounding growth in Silicon Valley since then has driven innovation around these machines, making them cheaper, more reliable, and more user friendly. The presence of computers, and especially networked computers, changed every aspect of business over the past 45 years, leading to whole new markets and products that could scarcely be dreamed of before, as well as socially transformative access to information and knowledge through computer networks. The next Kondratiev wave? Computers are rapidly approaching the point of saturation in many markets. Microprocessors are in every imaginable device, and there are over 4.6 billion cell phone users on the planet. Computer processor and memory manufacturing is a cut-throat business conducted on the slimmest of margins, and while technology keeps improving, at this point, much so-called “innovation” has become about advertising and sales, not fundamental technological breakthroughs. The dot-com bubble and recent financial crisis, which was made possible by complex computerized financial instruments, are two signs that the Kondratiev wave based off of computers may be reaching its peak, and we are now in a period of structural adjustment. Kondratiev wave theory would posit that the Great Recession cannot be blamed only on complex derivatives, bad mortgages, or greedy bankers, or government deficits, although these are all contributing factors. Rather these are signs that we have reached the limits of our present technology. Escaping it will require a new carrier-branch technology, with all that that entails. I can’t tell you what that technology will be renewable energy, an industrial revolution founded on nanotechnology and synthetic biology, completely recyclable zero-waste products that turn trash into gold, or advances in robotics and artificial intelligence. What is certain, however, is that it will be based on a fundamental breakthrough in science and technology.
  • Le plan de développement des cités de l’innovation prévoit, dans sa première phase, de lancer en 2011 la réalisation de 4 cités de l’innovation en partenariat avec les Universités . Citer les villes concernées par la première phase.
  • Le plan de développement des cités de l’innovation prévoit, dans sa première phase, de lancer en 2011 la réalisation de 4 cités de l’innovation en partenariat avec les Universités . Citer les villes concernées par la première phase.
  • Le plan de développement des cités de l’innovation prévoit, dans sa première phase, de lancer en 2011 la réalisation de 4 cités de l’innovation en partenariat avec les Universités . Citer les villes concernées par la première phase.
  • Le plan de développement des cités de l’innovation prévoit, dans sa première phase, de lancer en 2011 la réalisation de 4 cités de l’innovation en partenariat avec les Universités . Citer les villes concernées par la première phase.
  • Le plan de développement des cités de l’innovation prévoit, dans sa première phase, de lancer en 2011 la réalisation de 4 cités de l’innovation en partenariat avec les Universités . Citer les villes concernées par la première phase.
  • Le plan de développement des cités de l’innovation prévoit, dans sa première phase, de lancer en 2011 la réalisation de 4 cités de l’innovation en partenariat avec les Universités . Citer les villes concernées par la première phase.
  • Le plan de développement des cités de l’innovation prévoit, dans sa première phase, de lancer en 2011 la réalisation de 4 cités de l’innovation en partenariat avec les Universités . Citer les villes concernées par la première phase.
  • Le plan de développement des cités de l’innovation prévoit, dans sa première phase, de lancer en 2011 la réalisation de 4 cités de l’innovation en partenariat avec les Universités . Citer les villes concernées par la première phase.
  • Le plan de développement des cités de l’innovation prévoit, dans sa première phase, de lancer en 2011 la réalisation de 4 cités de l’innovation en partenariat avec les Universités . Citer les villes concernées par la première phase.
  • Le plan de développement des cités de l’innovation prévoit, dans sa première phase, de lancer en 2011 la réalisation de 4 cités de l’innovation en partenariat avec les Universités . Citer les villes concernées par la première phase.
  • Le plan de développement des cités de l’innovation prévoit, dans sa première phase, de lancer en 2011 la réalisation de 4 cités de l’innovation en partenariat avec les Universités . Citer les villes concernées par la première phase.
  • Le plan de développement des cités de l’innovation prévoit, dans sa première phase, de lancer en 2011 la réalisation de 4 cités de l’innovation en partenariat avec les Universités . Citer les villes concernées par la première phase.
  • Le plan de développement des cités de l’innovation prévoit, dans sa première phase, de lancer en 2011 la réalisation de 4 cités de l’innovation en partenariat avec les Universités . Citer les villes concernées par la première phase.
  • Le plan de développement des cités de l’innovation prévoit, dans sa première phase, de lancer en 2011 la réalisation de 4 cités de l’innovation en partenariat avec les Universités . Citer les villes concernées par la première phase.
  • Le plan de développement des cités de l’innovation prévoit, dans sa première phase, de lancer en 2011 la réalisation de 4 cités de l’innovation en partenariat avec les Universités . Citer les villes concernées par la première phase.
  • Le plan de développement des cités de l’innovation prévoit, dans sa première phase, de lancer en 2011 la réalisation de 4 cités de l’innovation en partenariat avec les Universités . Citer les villes concernées par la première phase.
  • Le plan de développement des cités de l’innovation prévoit, dans sa première phase, de lancer en 2011 la réalisation de 4 cités de l’innovation en partenariat avec les Universités . Citer les villes concernées par la première phase.
  • Le plan de développement des cités de l’innovation prévoit, dans sa première phase, de lancer en 2011 la réalisation de 4 cités de l’innovation en partenariat avec les Universités . Citer les villes concernées par la première phase.
  • Le plan de développement des cités de l’innovation prévoit, dans sa première phase, de lancer en 2011 la réalisation de 4 cités de l’innovation en partenariat avec les Universités . Citer les villes concernées par la première phase.

Patterns and characteristics of innovation in the ICT sector lessons from successful catching-up economies Patterns and characteristics of innovation in the ICT sector lessons from successful catching-up economies Presentation Transcript

  • European Tunisian Conference Tunis, 18-19th February 2013Patterns and characteristics of innovation in the ICT sectorlessons from successful catching-up economiesIlyas AZZIOUICNRST. MoroccoExpert Group Meeting on Investment, Research, Development andInnovation the ICT Sector ( Tunisia, 7-8 May 2013)Date : 7-9 May 2013
  • Relevant issues toinnovationWhy we need to innovate? How can we promote it? What linkages are there between research and innovation? Is it the same story across sectors( software, Auto, Agro-food, etc.)?
  • Relevant issues toinnovationAs Time Goes By: From the Industrial Revolutions to the InformationRevolution (Chris Freeman & Francisco Louçã)ICTICT
  • Sectoral Patterns ofInnovation• High R&D intensity (electronics, pharmaceuticals) and low R&D intensity(textiles, shoes) (EC, OECD)• Schumpeter Mark 1 ‘creative destruction’ easy entry, entrepreneurial role,innovation (machine, biotech), Schumpeter Mark 2 ‘creativeaccumulation’ large firms, barriers to entry (semiconductors 1990s,mainframes 1950-1990s)• Nature of knowledge and learning (Malerba and Orsenigo 1996/7):technological opportunities, appropriability conditions, cumulativeness• Sources of R&D for other sectors (computers, instruments), users oftechnology (textiles, steel) (Scherer 1982)• Nucleus sectors (electronics, machinery, instruments, chemicals) thatgenerate innovations, secondary sectors in generating innovation (auto,steel), user sectors (services) (Robson et al 1988)Attempts to classify sectoral patterns ofinnovation
  • Sectoral Patterns ofInnovationInnovation in sectors is the result of different learning processes, ofthe use of different knowledge and of the interaction of differentactorsMajor differences across sectors exist in the relative importance ofproduct and process innovations, size and diversification of innovatingfirmsSector regularities: in some sectors the source of technology issuppliers of equipment (textiles, construction), other contribute to theirprocess or product technology (chemicals). Firms in assembly andcontinuous process industries (autos or steels) concentrate on processinnovation, mechanical and electrical engineering (machinery )concentrate on product innovationWhy sectoral innovation systems ?
  • Sectoral Patterns ofInnovationCategory of firm(1)Typical coresectors(2)Determinants of technologicalTrajectoriesTechnologicaltrajectories(6)Measured characteristicsSourcesoftechnology(3)Typeofuser(4)Means ofappropriation(5)Source ofprocesstechnology(7)Relativebalancebetweenproduct andprocessinnovation(8)Relative size ofinnovatingfirms(9)Intensity anddirection oftechnologicaldiversification(10)Supplier dominatedAgriculture;housing;PrivateservicestraditionalmanufactureSuppliersResearchextensionservices;big usersPricesensitiveNon-technical(e.g. trade-marks,marketing,advertising,aesthetic design)Cost-cutting Suppliers Process Small Low verticalScaleIntensiveProductionintensiveSpecialisedSuppliersBulk materials(steel, glass);assembly(consumerdurables &autos)Machinery;instrumentsPE;suppliers;R&DDesign anddevelopmentusersPricesensitivePerformancesensitiveProcess secrecyand know-how;technical lags;patents; dynamiclearningeconomies; designknow-how;knowledge ofusers; patentsCost-cutting(productdesign)ProductdesignIn-house;suppliersIn-house;customersProcessProductLargeSmallHigh verticalLow concentricScience basedElectronics/electrical;chemicalsR&DPublicscience;PEMixed R&D know-how;patents; processsecrecy andknow-how;dynamic learningeconomiesMixed In-house;suppliersMixedLargeLow verticalHigh concentricNote: PE = Production Engineering DepartmentSource: Pavitt (1984)Pavitt’s (1984) taxonomy of sectoralpatterns of innovation
  • Sectoral Patterns ofInnovationSupplier DominatedProduction IntensiveScale IntensiveProduction IntensiveSpecialized SuppliersScience BasedTypical Sectors: Agriculture; housing; services,construction, traditional manufacturingSources of technology and innovation : Minorcontribution to their process or product technology((Weak in-house R&D and engineering). Most processinnovations come from suppliers of equipment andmaterials (IT-intensive design) Research extensionservices; big users.Type of user: Price sensitiveMeans of appropriation : Non-technical (e.g. trade-marks, marketing, advertising, aesthetic design, skills)Technological trajectories: Cost-cutting throughProcess innovation.Size of innovating firms: Small
  • Sectoral Patterns ofInnovationSupplier DominatedProduction IntensiveScale IntensiveProduction IntensiveSpecialized SuppliersScience BasedTypical Sectors: Firms producing Bulk materials (steel,glass, food industry) and durable consumer goods &vehicles. Technological skills are used to exploit scaleeconomies.Sources of technology and innovation : Production &Engineering Dprt (Process Innovation), In-house R&D(product design), specialized Suppliers of equipment andinstrumentation.Type of user: Price sensitiveMeans of appropriation : Process secrecy and know-how; technical lags; patents; dynamic learningeconomies; design know-how; knowledge of users;Technological trajectories: Cost-cuttingSize of innovating firms: Large
  • Sectoral Patterns ofInnovationSupplier DominatedProduction IntensiveScale IntensiveProduction IntensiveSpecialized SuppliersScience BasedTypical Sectors: Machinery; Equipment & instruments.Sources of technology and innovation : Design anddevelopment, users,Type of user: Performance sensitiveMeans of appropriation : firm-specific skills reflected incontinuous improvements in product design and the abilityto respond sensitively & quickly to users’ needs;Technological trajectories: Product-designSize of innovating firms: Small
  • Sectoral Patterns ofInnovationSupplier DominatedProduction IntensiveScale IntensiveProduction IntensiveSpecialized SuppliersScience BasedTypical Sectors: Pharmaceutical, Chemical and theElectronic/Electrical sectors.Sources of technology and innovation : in house R&Dand engineering departments, Public R&D,Type of user: Performance and Price sensitiveMeans of appropriation : Patents (esp. Chemistry)secrecy, technical lags, firm-specific skills and ability tooperate large scale assembly);Technological trajectories: Mixed (cost cutting +Product-design)Size of innovating firms: Large
  • Sectoral Patterns ofInnovationPavitt’s (1984) taxonomy was an important leap forward inunderstanding sectoral innovation patterns but:Most of understanding of innovation derived from studies ofmanufacturing and product innovation;Provides a poor understanding of service Innovation althoughservices account for more than 70% of Added Value andEmployment in the industrialised economies;Neglects the pervasive and disruptive impact that had ICT afterthe 80s on both sectors manufacturing & services + thetransmission of IT from capital goods sector to services: from (backoffice) process improvements (efficiency of delivery of existingservices), to process innovations (service quality), to productinnovations (new services),
  • Sectoral Patterns ofInnovation
  • Sectoral Patterns ofInnovationSupplier DominatedScale Intensivephysical networksScale IntensiveInformation networksScience BasedTypical Sectors:1.Personal Services (Restaurants, Laundry, Beauty).2.Public and Social Services (Health, Education)Sources of technology and innovation : weak in-houseR&D, engineering capability & software expertise. Most of theinnovations are coming from suppliers of materials,information, equipment and ICT sector.Type of user: 1) Performance sensitive 2) quality sensitiveMeans of appropriation : 1) Non-technical (e.g. trade-marks, marketing, advertising, aesthetic design, skills)2) not allowed, public,Technological trajectories: Mixed 1) Product-design 2)Performance improvement,Size of innovating firms: 1) Small 2) Large
  • Sectoral Patterns ofInnovationSupplier DominatedScale Intensivephysical networksScale IntensiveInformation networksScience BasedTypical Sectors: Services involving large back officeadministrative tasks that are suitable for the application ofICT to reduce costs (Transport & travel, Wholesale,distribution)Sources of technology and innovation : Manufacturersand Software companies .Type of user: Price sensitiveMeans of appropriation : Standards and normsTechnological trajectories: cost cutting and networking,Size of innovating firms: Large
  • Sectoral Patterns ofInnovationSupplier DominatedScale Intensivephysical networksScale IntensiveInformation networksScience BasedTypical Sectors: Firms dependent on elaborateinformation networks (e.g., banks, insurance, telecom &broadcasting), Public utilities such as electricity, water &gas supply might be included.Sources of technology and innovation : Manufacturers(ATMs for banks) Software companies, in house.Type of user: Price sensitiveMeans of appropriation : Standards and normsTechnological trajectories: cost cutting and networking,Size of innovating firms: Large
  • Sectoral Patterns ofInnovationSupplier DominatedScale Intensivephysical networksScale IntensiveInformation networksScience BasedTypical Sectors: Since late 80s Emergence of anincreasing nb Business services closely linked to R&D,software and DL of IT applications.Sources of technology and innovation : in-house R&Dand engineering capabilities, customers, suppliers.Type of user: Performance sensitiveMeans of appropriation : R&D Know How , skillsCopyright, product differentiation,Technological trajectories: System design,Size of innovating firms: Small & medium
  • Catching up indifferent sectoralsystemsWhat can we learn from the story of catch-up in six different sectorsin emerging Countries (Taiwan, Korea, brazil, India, China, andothers)?1.Pharmaceuticals (Science based),2.Autos (scale intensive),3. Software (specialized supplier and service sectors),4.Semiconductors and Telecom (design and engineering is important),5. Agro-food (traditional sectors).« Catching-up in different sectoral systems: evidence from sixindustries »Franco Malerba & Richard Nelson (2010)
  • Catching up indifferent sectoralsystems firms are the key actors in catch-up , Learningand Capabilities development of domesticfirms is a necessary condition for catch upbecause they provide the catching up countrywith the ability of absorbing foreign knowledge& technology and adapting and modifyingthem to generate new knowledge andproducts.Common features affectingcatch-up in 6 sectorsFirms LearningAccess to foreignKnowledgeSkilled Human CapitalActive GovernmentPolicy
  • Catching up indifferent sectoralsystems the channels to which this access took placehave differed (sector & country). from verticalnetworks with suppliers and users, to localnetworks, collaborative R&D or productionagreements, to participation to the global valuechain or just outsourcing; When access to foreign knowledge did nottake place, as in telecommunications in Indiaand Brazil, the catch-up process has beenseriously unpairedCommon features affectingcatch-up in 6 sectorsFirms LearningAccess to foreignKnowledgeSkilled Human CapitalActive GovernmentPolicy
  • Catching up indifferent sectoralsystems Important inward mobility form advancedcountries of highly skilled human capital(scientists, engineers, technopreneurs)Diasporap and foreigners (consultants) werecritical to the catch-up)Common features affectingcatch-up in 6 sectorsFirms LearningAccess to foreignKnowledgeSkilled Human CapitalActive GovernmentPolicy
  • Catching up indifferent sectoralsystems In our 6 sectors government policy has indeedstimulated and fostered the learning processesand the capability formation of domestic firmswith different intensity and tools.Common features affectingcatch-up in 6 sectorsFirms LearningAccess to foreignKnowledgeSkilled Human CapitalActive GovernmentPolicy
  • Catching up indifferent sectoralsystems In automobile and telecom large firms havebeen major actors in the catch-up process in software and agro-food small firms havedriven sectoral growth New entrepreneurial firms, SMEs or large size,characterize the pharmaceutical and thesemiconductor firms local networks important for the catch-upprocess in semiconductors (Taiwan) , formaland informal interaction, knowledge sharing Advent of technological and marketdiscontinuities may favour either totallynewcomers or established domesticcompanies. (Software in India Vs Telecom &Pharmaceuticals where knowledge iscumulative and strongly science based)Diffrences across sectoral systemsIndustry StructureIndustry StructureDemand and verticallinksGov PoliciesOther elements
  • Catching up indifferent sectoralsystems Multinational companies played different roles :1. software, pharmaceuticals and semiconductors:catching up countries had to specialize in someproduct range in the global value chain and eventuallymove uo the learning ladder to more advanced stagesof production or research.2. Telecom and Autos: the use of license frommultinationals or from foreign firms, or joint venturesand alliances have been extensively used by domesticfirms to learn and accumulate capabilities.Diffrences across sectoral systemsIndustry StructureDemand and verticallinksGov PoliciesOther elements
  • Catching up indifferent sectoralsystems Demand has entered catch-up in two ways:1. Exports: have been the drivers of catch-up, forboth small firms and large firms. This is thecase of semiconductors, telecom,pharmaceuticals, software and auto.2. Domestic Market: has been a major driver ofthe learning process and the accumulation ofcapability by domestic firms in Large countriessuch as China, India and Brazil;Diffrences across sectoral systemsIndustry StructureDemand and verticallinksGov PoliciesOther elements
  • Catching up indifferent sectoralsystems Government policy has differed in the useof tools and measures1. Telecom ( Korea and China) - public policyused R&D support, R&D consortia and publicresearch organizations to help firms to moveinto new generations of telecom technologiesand products2. In software governments have used differentpolicies and tools, ranging from publicprocurement, to R&D support for SMEs,favourable companies tax rates and incentivesto attract foreign direct investmentsDiffrences across sectoral systemsIndustry StructureDemand and verticallinksGov PoliciesOther elements
  • Catching up indifferent sectoralsystems Standards, regulations and norms : forrelax IP laws were important for the catch-upof Pharmaceutical industry in India and Brazil Finance: VC (Private equity) critical for thedevelopment of Software industryDiffrences across sectoral systemsIndustry StructureDemand and verticallinksGov PoliciesOther elements
  • Catching up indifferent sectoralsystems In some sectors such as Agriculture, healthand Telecom Public research proved quiterelevant to domestic firms In the other sectors the main role ofuniversities was to provide advanced trainingfor advanced human capital in the scientific,engineering and managerial fields. So theyincrease the absorptive capacity of the humancapital for foreign cutting edge knowledge.Diffrences across sectoral systemsUniversities & PublicResearch Laboratories
  • Conclusion
  • Conclusion
  • May 8th, 2013 ESCWA Expert meeting 30Thanks for your attention !‫لصغائكم‬ ‫شكرا‬ !