The Innovation Policy Knowledge Base 8 Global Trends and Challenges Per Koch, Director for Analysis and Strategic Development The Research Council of Norway TAFTIE Conference Annalis’07, Istanbul Nov 28 2007

Challenge No. 1: To shift from a technology push perspective to a vision of learning

The linear model is not dead Research and technological development in universities, RTOs and companies gives birth to an idea and relevant new knowledge Companies make use of these ideas in the development of new products and processes The company brings the new product to the market The linear thinking lives on in a dominant technology push model

The 3 percent objective is based on a linear model Increase national investments in R&D Produce more knowledge Apply that knowledge to industrial production Result: innovation and wealth creation There is nothing wrong in having increased investments in R&D as a policy objective, but here it is used as a proxy for innovation

Increase national investments in R&D

Produce more knowledge

Apply that knowledge to industrial production

Result: innovation

and wealth creation

The systemic model of learning and innovation Knowledge of customer and market needs In-house learning Marked knowledge Tacit knowledge Acquired technology Literature Conferences and fairs New employees Commissioned R&D In-house R&D market pull Research is still very important, but is one of many learning tools. Indirect flow of R&D based knowledge and technology. New or improved products, processes or services User input

Focus on other aspects of learning R&D embedded in technology and human capital Design Branding Organisational change Management practices and types of ownership

R&D embedded in technology and human capital

Design

Branding

Organisational change

Management practices and types of ownership

A new focus on research as a learning tool The effects of R&D products on the innovation system Company profits as result of sales of new or improved products, processes or services Spillover effect 1: the new products leads to increasing productivity among customers Spillover effect 2: the new products leads to innovation among customers and suppliers The effects of R&D on learning in the innovation system Research builds competences that can be used to absorb knowledge and technologies developed elsewhere Research may lead to network building University research teaches students how to use the tools of science

The effects of R&D products on the innovation system

Company profits as result of sales of new or improved products, processes or services

Spillover effect 1: the new products leads to increasing productivity among customers

Spillover effect 2: the new products leads to innovation among customers and suppliers

The effects of R&D on learning in the innovation system

Research builds competences that can be used to absorb knowledge and technologies developed elsewhere

Research may lead to network building

University research teaches students how to use the tools of science

Challenge No. 2: Understanding innovation in “low tech” industries

OECD: ” There is a puzzle about Norway” ” Although measurement is incomplete, R&D intensity appears weak, patenting is moderate and business surveys report a limited interest for innovative activity. Yet, the level of productivity is high in the mainland economy and its trend growth enviable, showing a capacity to absorb innovation spillovers and undertake organisational and managerial changes.” OECD Economic Survey Norway 2007

” Although measurement is incomplete,

R&D intensity appears weak,

patenting is moderate and

business surveys report a limited interest for innovative activity.

Yet,

the level of productivity is high in the mainland economy and

its trend growth enviable,

showing a capacity to absorb innovation spillovers

and undertake organisational and managerial changes.”

OECD Economic Survey Norway 2007

Differences in industrial structure, 2003 Notes: high tech includes telecommunications, software, computing and other business services And medium-low includes construction and utilities. Source: STAN database and NIFU STEP

Understanding innovation in resource based industries Resource-based industries may be knowledge-intensive and profitable, but not R&D intensive Farming, aquaculture fisheries, petroleum and mining The word “high tech” is misleading, as it refers to R&D as a percentage of company turn-over, and not to the company’s use of advanced technology and knowledge

Resource-based industries may be knowledge-intensive and profitable, but not R&D intensive

Farming, aquaculture fisheries, petroleum and mining

The word “high tech” is misleading, as it refers to R&D as a percentage of company turn-over, and not to the company’s use of advanced technology and knowledge

Resource based companies do not invest much in R&D, but they may make use of advanced technologies (often developed elsewhere) and they do employ highly competent engineers and technicians A lot of process innovation Little R&D per company, but branches of industry as a whole may invest much (food) Underreport R&D, as R&D is part of the whole production process Use of other forms of innovation: branding, marketing

Resource based companies do not invest much in R&D, but they

may make use of advanced technologies (often developed elsewhere)

and they do employ highly competent engineers and technicians

A lot of process innovation

Little R&D per company, but branches of industry as a whole may invest much (food)

Underreport R&D, as R&D is part of the whole production process

Use of other forms of innovation: branding, marketing

Indirect use of research MS Kristian With Refrigeration/containership built by Vaagland Båtbyggeri AS on the North-West Coast of Norway Argon AS has installed the electronics Radar, satellite phone and TV-antenna delivered by ProNav Sonar, logg, radio and electronic map systems delivered by Furuno Gyro compass and autopilot delivered by Simrad The advanced technology has been “black-boxed”. You do not need to know how to build a TV to watch the Simpsons.

MS Kristian With Refrigeration/containership built by Vaagland Båtbyggeri AS on the North-West Coast of Norway

Argon AS has installed the electronics

Radar, satellite phone and TV-antenna delivered by ProNav

Sonar, logg, radio and electronic map systems delivered by Furuno

Gyro compass and autopilot delivered by Simrad

Challenge 3: We need to get a better understanding of the role of services The largest part of the economy A very heterogeneous sector A residual factor (what’s left when we leave out manufacturing and food) We need a new categorization

The largest part of the economy

A very heterogeneous sector

A residual factor (what’s left when we leave out manufacturing and food)

We need a new categorization

Important service sectors B2C services: non-R&D companies, including retail, people care and tourism Retail: Innovation in transport, storage, delivery and customer care Tourism: Innovation in product range, presentation, transportation and marketing

B2C services: non-R&D companies, including retail, people care and tourism

Retail: Innovation in transport, storage, delivery and customer care

Tourism: Innovation in product range, presentation, transportation and marketing

Services as partners and knowledge providers for industry Advanced knowledge providers, e.g. R&D intensive B2B ICT companies (Knowledge intensive business services) These companies may compensate for the lack of R&D in others. Low R&D measurements in some industries may be an effect of outsourcing

Advanced knowledge providers, e.g. R&D intensive B2B ICT companies (Knowledge intensive business services)

These companies may compensate for the lack of R&D in others.

Low R&D measurements in some industries may be an effect of outsourcing

Challenge 4: Understanding the effects of public sector innovation Innovation in the private sector is understood as an investment, in the public sector as an expense Innovation in the public sector and the effect on industry Public/private learning arenas Public procurement The effect of social welfare on risk taking and company behavior We have no output indicators!

Innovation in the private sector is understood as an investment, in the public sector as an expense

Innovation in the public sector and the effect on industry

Public/private learning arenas

Public procurement

The effect of social welfare on risk taking and company behavior

We have no output indicators!

Company Learning Networks innovation Customers and users Suppliers Policy- institutions Financial Institutions R&D Institutions Consultants Public policy Cultural framework International framework Industrial structure Challenge 5: Understanding competence flows in the innovation system

The role of competence flows The role of education User-driven innovation Customer/supplier relationships “ Open innovation” and industry collaboration The role of KIBS The role of public sector institutions National innovation systems must have porous boundaries. The EU is not competing with the US or Japan. This is not a zero-sum game!

The role of education

User-driven innovation

Customer/supplier relationships

“ Open innovation” and industry collaboration

The role of KIBS

The role of public sector institutions

Challenge 6: Understanding the heterogeneity of innovation systems Norway, Sweden, Iceland, Finland, the Netherlands, Bravaria, Catalonia, Northern Italy and the UK have all successful innovation systems that produces wealth. But they are all totally different from each other. Unique historical trajectories. Unique socio-cultural framework conditions There is no best practice. Finland and Ireland cannot be used as models for other countries!

Norway, Sweden, Iceland, Finland, the Netherlands, Bravaria, Catalonia, Northern Italy and the UK have all successful innovation systems that produces wealth.

But they are all totally different from each other.

Unique historical trajectories.

Unique socio-cultural framework conditions

There is no best practice.

Finland and Ireland cannot be used as models for other countries!

Challenge 7: Understanding socio-cultural framework conditions Stable macro-economic framework conditions Disciplined fiscal policy Competition policy encouraging innovation Low taxes An open economy Socio-cultural framework conditions Egalitarian culture with high social mobility High wages for blue collar work gives impetus towards innovation (robots, internet banking) High educational levels brings flexibility and labour mobility An efficient public sector helps industry A trustworthy welfare system reduces risk Political and social stability gives trust

Stable macro-economic framework conditions

Disciplined fiscal policy

Competition policy encouraging innovation

Low taxes

An open economy

Socio-cultural framework conditions

Egalitarian culture with high social mobility

High wages for blue collar work gives impetus towards innovation (robots, internet banking)

High educational levels brings flexibility and labour mobility

An efficient public sector helps industry

A trustworthy welfare system reduces risk

Political and social stability gives trust

Challenge 8: Cultural understanding in a globalised economy Globalisation means that we have a cultural convergence at the same time as we see the birth of a large number subcultures The Long Tail International trade requires new language and culture skills A new division of labor and specialization in the global markets A new important role for the humanities and the arts

Globalisation means that we have a cultural convergence at the same time as we see the birth of a large number subcultures

The Long Tail

International trade requires new language and culture skills

A new division of labor and specialization in the global markets

Cultural decoding

THE ENTERTAINMENT INDVSTRY REQVIRES HELP FROM THE ARTS AND THE HVMANITIES TV series Rome

Understanding and developing sub-cultures

Design and identity: Apple & Jonathan Ive

Challenges A shift from a technology push perspective to a vision of learning Innovation in resource based industries Innovation in – and the role of -- services The effects of public sector innovation Understanding competence flows in the innovation system Socio-cultural framework conditions The heterogeneity of innovation systems Cultural understanding in a globalised economy [email_address] www.rcn.no www.aviana.com/blog

A shift from a technology push perspective to a vision of learning

Innovation in resource based industries

Innovation in – and the role of -- services

The effects of public sector innovation

Understanding competence flows in the innovation system

Socio-cultural framework conditions

The heterogeneity of innovation systems

Cultural understanding in a globalised economy