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©	  Wissenskapital	  ZFI/ECI	  GmbH	  2013	  	  	   1	  Reflections	   on	   how	   to	   curb	   economic	   growth,	   s...
©	  Wissenskapital	  ZFI/ECI	  GmbH	  2013	  	  	   2	  into	  high-­‐tech	  or	  internet	  ventures	  copying,	  rather	...
©	  Wissenskapital	  ZFI/ECI	  GmbH	  2013	  	  	   3	  some	   SME	   actually	   strategically	   do	   not	   try	   to...
©	  Wissenskapital	  ZFI/ECI	  GmbH	  2013	  	  	   4	  	  On	  Economic	  Policy	  	  The	   goals	   of	   the	   Europe...
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2013 presentation tallinn_icip


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What we recommend the European Commission to do on IP rights to curb innovation and growth within Europe.

The base for innovation is today much based on IC. The sustainable value creation is different on Europe compared to major regions like the US and China. We focus more on the resources for creation and care about a fare distribution of the outcome. The European Commission in Brussels should take this into consideration.

Published in: Economy & Finance, Business
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2013 presentation tallinn_icip

  1. 1. ©  Wissenskapital  ZFI/ECI  GmbH  2013       1  Reflections   on   how   to   curb   economic   growth,   social   prosperity   and  innovation  based  on  Intellectual  Capital  (IC)  and  Intellectual  Property  (IP).      In   2000   the   Lisbon   agenda   agreed   on   various   initiatives   to   stimulate  economic   growth   within   the   European   Union   member   states.   The   goals  were  in  2010  to  have  a  higher  GDP  per  capita  than  the  US  and  to  become  „the  most  innovating“  region  in  the  world.  Various  programs  were  created  to  help  SME1  getting  funding  for  growth  and  innovation  as  well  as  how  they  can  protect  their  outcome,  one  area  especially  in  focus  being  the  IP.  These  goals  have  not  been  reached.    Intellectual   Capital   Statement   (or   Intangible   Assets   based  Management)    Around  1.000  SME  have  made  an  IC  Statement  (German  “Wissensbilanz")  in  Germany2  as  of  today,  April  2013.  With  the  Fraunhofer  Academy  in  Munich,  moderators  or  consultants  are  being  educated  for  a  fee  and  some  of  them  are   today   successfully   working   as   coaches   and   IC   analysts.   With   the  “Intellectual  Capital  –  Made  in  Europe”  project,  the  German  „Wissensbilanz“  was   implemented   in   five   other   European   countries3  and   developed   a  „quick-­‐test  on  IC“  sponsored  by  the  Warsaw  Stock  Exchange  in  2008.    These  results  may  look  all  right  at  a  glance,  but  still  have  not  changed  the  behaviour   on   the   financial   markets   and   political   decisions.   Quantitative  factors   still   play   an   overwhelming   role   when   it   comes   to   analysing  companies  or  even  states.  Today  even  more  focus  is  placed  on  short-­‐term  gains   and   there   is   reluctance   for   longer   investment   horizons.   In   times   of  uncertainty,   the   financial   actors   are   not   prepared   to   take   more   risks   and  there  seems  to  be  a  fixed  concentration  on  existing  players4,  following  the  (contra  to  IC)  philosophy  of  shareholder  value.  In  politics,  savings  are  being  made  in  education  and  research,  not  to  mention  the  withdrawal  of  the  state  in   various   areas5.   This   means   that   local   competence   in   Europe   is   not  considered   as   a   competitive   advantage   since   most   of   the   investments   go                                                                                                                  1  SME  –  Small  and  Midsized  companies.  Usually  defined  as  companies  having  up  to  250  employees  (EU).  In  Germany  up  to  400  employees.  2  and  Fraunhofer  study  2010  3  www.incas-­‐  (Poland,  Spain,  France,  Slovenia  and  Germany)  4  Lead  by  US  Private  Equity  and  US  Venture  Capital    5  Since  the  fall  of  the  iron  curtain,  there  has  been  a  common  understanding  between  academia  and  politics  that  the  state  should  leave  as  much  as  possible  of  strategic  decisions  to  the  market.  It  is  also  believed,  that  the  markets  are  self-­‐regulating.  If  this  would  have  been  the  case,  there  would  be  no  banking  crisis  and  no  horse  meat  where  beef  is  on  the  package.    
  2. 2. ©  Wissenskapital  ZFI/ECI  GmbH  2013       2  into  high-­‐tech  or  internet  ventures  copying,  rather  then  inventing  yourself,  ideas   from   the   US   rather   than   inventing   self-­‐made   innovation.     Also   the  funding  by  the  European  Commission  has  been  more  on  copying  ideas  from  outside  Europe  and  rather  then  investing  in  regional  core  competencies.      The  IC  Statement  finds  and  evaluates  the  key  success  factors  a  company  or  a   region   needs   to   stay   competitive   through   an   efficient   organisation   and  areas   where   to   grow.   Innovation   is   the   key   factor.   However,   most   of  European   SME’s   are   not   aware   of   the   risks   and   opportunities   IP   has   on  international  expansion  and  to  secure  the  existing  business.      On  IC  Statement  and  Management  Reporting      In   2009   the   German   Federal   Ministry   of   Economics   started   a   project   to  integrate  the  „Wissensbilanz“  into  the  Management  Report.6  As  a  useful  tool  for   auditors   they   made   SME   aware   of   operational   risks   covered   by   the  „Wissensbilanz“.   The   SME   in   Germany   are   sceptical   about   making   this   a  legal  request  for  external  reporting.  They  see  IC  as  the  basis  for  reaching  their   strategic   goals   and   do   not   want   to   report   this   to   their   competitors.  However,   as   a   report   to   improve   internal   efficiency   and   to   improve  communication   to   external   stakeholder   (on   a   voluntary   basis),   we   can  confirm  the  same  positive  response  as  mentioned  under  „Wissensbilanz“  in  general.  However,  these  checklists7  help  to  improve  the  communication  and  understanding  between  the  auditors,  companies  and  stakeholders.  It  may  be   a   base   for   financial   rating   more   adapted   to   how   we   create   value   in  Europe.    On  Intellectual  Property  Rights    The  German  SME’s  generally  do  not  see  the  protection  of  their  IP  as  crucial.  They   focus   more   on   delivering   quality   in   niches   and   are   reluctant   of  communicating   more   to   the   outside   world   than   necessary.   A   problem  occurs  to  be  with  patents  that  the  information  disclosed  becomes  a  public  document.  Since  the  punishment  of  breaking  international  IP  rights  is  low,                                                                                                                  6  Wissensbilanz  als  Element  der  Lageberichterstattung  „Transferprojekt  zur  Umsetzung  für  KMUs“.  The  project  consists  of  expert  on  international  accounting  standards,  IC  and  leading  auditing  firms.  Deliveriers  end  of  2012  will  be  a  checklist  for  SME  and  auditors  focusing  on  financial  risks  and  how  IC  can  reduce  this  uncertainty.  The  „Lagebericht“  was  introduced  1931  in  Germany  in  the  Weimarer  Republik  on  order  to  show  the  public  how  state  money  was  invested  in  firms  in  the  realm  of  the  great  depression.    7  www.reporting-­‐immaterieller-­‐werte-­‐und-­‐      
  3. 3. ©  Wissenskapital  ZFI/ECI  GmbH  2013       3  some   SME   actually   strategically   do   not   try   to   protect   their   assets   via   IP  rights  in  order  to  protect  their  competitive  advantage.    German   SME’s   are   more   focused   on   using   their   know-­‐how   and   technical  skills  to  create  value  for  their  customers.  In  the  global  IP  business  however,  the  IP  brokers  or  traders  are  focusing  more  an  “asset  sweating”  than  on  the  creation   of   assets.   Whereas   focus   within   the   companies   is   more   on   the  processes,  the  global  trend  is  more  on  trading  existing  IP’s  to  make  a  short-­‐term   profit.   Since   this   market   is   being   dominated   by   financially   strong  players,   the   European   SME   stands   a   very   small   chance   to   protect   their  interests   globally.   This   problem   has   been   evident   especially   in   Germany  since  China  began  its  export  oriented  industrial  boom  and  since  2010  has  removed   Germany   from   its   top   position   as   global   export   champion8.   In   a  global  economic  world,  the  countries  with  a  high  value  added  industry  or  service   sector   are   the   ones,   which   have   the   most   to   lose   if   there   is   no  efficient  protection  of  IP.    On  IC  of  Cities  and  Regions    Most  communities  in  Europe  are  heavily  indebted  and  perspectives  being  gloomy   due   to   negative   demographic   trends   and   the   economic   outlook.  Therefore  it  is  important  to  define  how  the  triple  helix  should  work.  Neither  communities,   academia   or   „Wirtschaft“   can   work   alone.   They   are   all  dependant   on   one   another   and   this   work   should   be   managed   and  coordinated.    Work  has  been  done  on  this  in  Germany9  and  within  the  realm  of   the   Atlantic   program10  and   it   appears   that   the   communities   should  assume  the  responsibility  to  coordinate  this  strategic  issue.  The  reason  is  that  academia  in  Europe  hast  the  reputation  of  being  too  far  away  from  SME  needs  and  have  „a  life  of  their  own“.  The  companies  are  struggling  with  an  economy  in  downturn  and  global  acting  ones  are  no  longer  in  the  hands  of  local   families   or   investors   but   usually   belong   to   international   funds   or  investors  with  few  connections  to  the  region.      A  more  active  state/municipal  seems  to  be  the  only  institution  available  to  funding   SME   since   the   volume   (or   ROI)   and   risk   of   investment   is   not  attractive   enough   to   the   global   players.   The   regional   knowledge   has   also  been   heavily   reduced   in   favour   of   greater   financial   centres   as   a  consequence  of  the  sub-­‐prime  crisis  and  dotcom  bubble.                                                                                                                  8  Exportweltmeister.  Germany  has  a  close  run  with  US  being  second  to  China.  Japan  is  clearly  on  the  fourth  place.  9  Stadt  Kempten  and  the  project  under  note  five.  10    
  4. 4. ©  Wissenskapital  ZFI/ECI  GmbH  2013       4    On  Economic  Policy    The   goals   of   the   European   Commission   in   2000   have   not   been   reached.  Europe’s  competitors  have  shown  how  important  the  role  of  state  policy  is  to  curb  industry  and  employment.  The  US  still  attracts  the  „brains“  and  is  leading  in  financial  services  and  trade,  giving  them  a  dominant  position  in  investment  allocation  and  funding.  China  dominates  production  and  has  a  clear  strategy  to  curb  domestic  industry  and  consumer  demand.  Together  with   Russia,   it   is   clear   that   the   US   and   China   have   a   clear   political   and  industrial  agenda  on  how  to  support  their  industry  to  gain  market  shares  and   therefore   creating   jobs   and   tax   income.   These   nations   very   well  understand  the  necessity  to  combine  research  (with  a  political  IP  protection  agenda),  „Wirtschaft“  and  politics  to  achieve  a  strong  position  on  the  global  markets.   For   Europe,   there   seems   to   be   no   clear   strategy11  on   how   to  protect   investments   in   IC,   although   it   is   necessary   if   Europe   wants   to  maintain   its   high   living   standard.   In   the   next   phase   of   European   funding  until  2020,  focus  should  not  only  be  on  how  to  support  innovation  but  also  consider   how   we   can   protect   the   outcome   and   the   consequences   IP   laws  have  on  sustainable  value  creation.    Conclusion    Europe   is   still   world   leader   when   it   comes   to   innovation   and   top   quality  services  and  products.  One  important  reason  behind  this  is  visualized  with  the  IC  Statement.  However,  these  assets  need  investments  and  the  outcome  should  be  protected  and  justly  distributed  between  entrepreneurs,  society  and   investors.   Today   the   investors   clearly   have   the   overhand   in   a   way,  where   it   is   not   clear   if   this   is   good   for   the   European   citizens   and   future.  Therefore  Europe  needs  to  lead  the  discussion  on  IC  and  IP  because  Europe  is  the  biggest  winner  (or  loser)  in  this  area.  Financial  capital  does  not  make  the  difference,  because  it  is  global  and  not  unique.    Thanks  to  the  Lisbon  agenda  these  matters  where  taken  seriously  and  a  lot  has  been  achieved.  Now  is  the  right  time  to  implement  these  findings  and  the  lead  should  be  initiated   from   the   EU   member   states   and   stimulate   SME   to   invest   in   IC,  protect  its  outcome  over  IP  and  make  sure  that  the  gains  are  distributed  also  to  those  who  take  risk  and  work  for  the  success  of  a  venture.    Oberreichenbach  April  2013/mk                                                                                                                  11  Or  even  contrary,  regarding  the  open  up  of  EU  market  to  foreign  investors,  without  reciprocity  from  China,  Russia  or  the  US.