Lecture 6.pptx

Advanced Topics in Strategic
Management
Prof. Dr. Raghda El Ebrashi
Associate Professor of Strategic Management
Head of the Management and Organization Department
1
DBA - El Ebrashi, 2022

National Innovation Systems
Lecture 6

NIS- What is it?
 The concept of national innovation systems rests on the premise that
understanding the linkages among the actors involved in innovation is
key to improving technology performance.
 Innovation and technical progress are the result of a complex set of
relationships among actors producing, distributing and applying various
kinds of knowledge.
 The innovative performance of a country depends to a large extent on
how these actors relate to each other as elements of a collective system
of knowledge creation and use as well as the technologies they use.
 These actors are primarily private enterprises, universities and public
research institutes and the people within them.
 The linkages can take the form of joint research, personnel exchanges,
crosspatenting, purchase of equipment and a variety of other channels.
3

5
4.94079
4.52753
3.36798
3.31278
3.27512
3.2105
3.13267
3.03292
2.83283
2.76578
2.75572
2.19294
2.16374
2.14058
2.07264
2.04135
1.93017
1.92465
1.87466
1.70274
1.40441
1.39181
1.27836
1.24323
1.17732
1.16038
1.04086
0.95978
0.83215
0.72388
0.65282
0.60132
0.54297
0.50901
0.4936
0.27437
0.06238
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5
Israel
Korea, Rep.
Switzerland
Sweden
Japan
Austria
Germany
Denmark
United States
Belgium
Finland
France
Netherlands
China
Norway
Iceland
Czech Republic
Singapore
Australia
United Kingdom
Estonia
Italy
United Arab Emirates
Spain
Greece
Brazil
Malaysia
Turkey
South Africa
Egypt
India
Tunisia
Algeria
Qatar
Argentina
Ethiopia
Kuwait
R&D as % of GDP

Rationale
6

Flow of knowledge
 The study of national innovation systems focuses on flows of knowledge. Analysis
is increasingly directed to improving performance in “knowledge based economies”
– economies which are directly based on the production, distribution and use of
knowledge and information.
 Knowledge, as embodied in human beings (as “human capital”) and in technology,
has always been central to economic development.
 But only over the last few years has its relative importance been recognized, just as that
importance is growing. Economic activities are becoming more and more knowledge-
intensive as seen in the growth in high-technology industries and the increasing demand
for highly skilled people. Investments in knowledge, such as in research and development,
education and training, and innovative work approaches are considered key to economic
growth.
 The national innovation systems approach reflects the increasing attention given to
the economic role of knowledge.
 Here, the emphasis is on mapping knowledge flows as a complement to measuring
knowledge investments. These flows, particularly of knowledge “codified” in publications,
patents and other sources, are both increasing and becoming easier to detect due largely
to information technology.
 The intent is to evaluate and compare the main channels for knowledge flows at the
national level, to identify bottlenecks and to suggest policies and approaches to improve
their fluidity.
 Put simply, this involves tracing the links and relationships among industry, government
and academia in the development of science and technology.
 Such analysis may ultimately lead to the ability to measure the “knowledge distribution
power” of a national innovation system, which is considered one determinant of growth
and competitiveness.
7

Systematic approach
 The national innovation systems approach also reflects the rise of
systemic approaches to the study of technology development as
opposed to the “linear model of innovation”.
 In the linear model, knowledge flows are modeled quite simply: the initiator
of innovation is science and an increase in scientific inputs into the pipeline
will directly increase the number of new innovations and technologies flowing
out of the downstream end.
 In reality, however, ideas for innovation can come from many sources and any
stage of research, development, marketing and diffusion. Innovation can take
many forms, including adaptations of products and incremental
improvements to processes.
 Innovation is thus the result of a complex interaction between various
actors and institutions. Technical change does not occur in a perfectly
linear sequence, but through feedback loops within this system.
 In the center of this system are the firms, the way they organize production
and innovation and the channels by which they gain access to external
sources of knowledge. These sources might be other firms, public and private
research institutes, universities or transfer institutions – either regional,
national or international.
 Here, the innovative firm is seen as operating within a complex network of co-
operating and competing firms and other institutions, building on a range of
joint ventures and close linkages with suppliers and customers.
8

Growing number of institutions
 As economic activities become more knowledge-intensive, a large and growing
number of institutions with specialized expertise of very different kinds are now
involved in the production and diffusion of knowledge.
 The determinants of success of enterprises, and of national economies as a whole, are ever
more dependent on their effectiveness in gathering and utilizing knowledge from these
institutions – whether they be in the private sector, public sector or academia.
 Moreover, each country has its own institutional profile depending on the governance
regime for enterprises, the organization of the university sector and the level and
orientation of government-funded research. There are marked differences in the relative
roles and weight of different institutions in national innovation systems, which partly
accounts for the focus on the country level.
 There are many channels through which knowledge can flow between these
institutions and a variety of approaches to measuring these flows. The discussion
here focuses on four basic knowledge flows among actors in a national innovation
system:
 1) interactions among enterprises;
 2) interactions among enterprises, universities and public research laboratories
 3) diffusion of knowledge and technology to firms; and,
 4) movement of personnel.
9

Knowledge Flows in NIS
10

1. Interaction among
enterprises
 Since the business sector is the main performer of research and
development and source of innovation in OECD economies, one of the
most significant knowledge flows in a national innovation system is that
stemming from technical collaboration among enterprises as well as
their more informal interactions.
 In most countries, R&D collaborations between firms and strategic
technical alliances are growing rapidly. This is especially evident in new
fields such as biotechnology and information technologies, where
development costs are particularly high.
 Firms collaborate to pool technical resources, achieve economies of
scale and gain synergies from complementary human and technical
assets.
 Also important, but more difficult to measure, are the informal linkages
and contacts among firms whereby knowledge and knowhow are
transferred, including relationships among users and producers and the
role of competitors as both a source for and stimulus to innovation.
11

 Assessments of the importance of collaborative enterprise
activities in national innovation systems show that such co-
operation can contribute to firm innovative performance.
Innovation system studies in Norway and Finland indicate that
the share of new products in overall sales is higher among firms
involved in co-operative ventures.
 Similar studies in Germany find that research co-operation
correlates with improved innovative performance in most
sectors. Evaluations of co-operative research programmes in
the European Union also reveal considerable indirect outcomes
in terms of “behavioural additionality”, i.e. an increase in
competences and skills that positively influence a firm’s
innovative capacity, such as networking capabilities and the
ability to identify and adapt useful technology.
12

2. interactions among enterprises,
universities and public research
laboratories
 Another primary knowledge flow in national innovation systems are linkages
between the public and private research sectors. On one side, the public
component consists primarily of public research institutes and universities. On the
other side are private enterprises.
 The quality of the public research infrastructure and its links to industry may be one
of the most important national assets for supporting innovation.
 Government-supported research institutes and universities are main performers of
generic research and produce not only a body of basic knowledge for industry, but
are also sources of new methods, instrumentation and valuable skills.
 Increasingly, the research conducted at these institutions is being supported by
enterprises who are collaborating with the public sector in joint technology
projects, contracting specific research or financing staff and researchers.
 In addition to such R&D collaboration, the public research sector serves as an
overall repository of scientific and technical knowledge in specific fields.
 The general ability of industry to access that knowledge is important. This can be
through patent data, published information about new scientific discoveries,
knowledge embedded in new instruments and methodologies, access to scientific
networks and spin-off firms nurtured in technology incubators.
13

Measurement of knowledge
flows
 Joint research activities - This includes both contract
research and financing of university staff to conduct
research.
 Co-patents and co-publications – The number of co-patents
or co-publications developed by enterprises in
collaboration with a university or research institute can be
compiled by analyzing patent records and publication
indices.
14

15
UNIVERSITY INDUSTRY COLLABORATION: THE VITAL ROLE OF TECH
COMPANIES’ SUPPORT FOR HIGHER EDUCATION RESEARCH (2020)

3. Diffusion of knowledge
 The most traditional type of knowledge flow in the
innovation system may be the dissemination of technology
as new equipment and machinery.
 The past decade showed increasing investments in
knowledge flow in the form of software and chemicals.
21

4. Personnel mobility
 The movement of people and the knowledge they carry with them
(often termed “tacit knowledge”) is a key flow in national innovation
systems.
 Personal interactions, whether on a formal or informal basis, are an
important channel of knowledge transfer within industry and between
the public and private sectors.
 The ability to locate and identify information and to access networks of
researchers and personnel is a valuable knowledge asset. In most
studies of technology diffusion, it is shown that the skills and
networking capabilities of personnel are key to implementing and
adapting new technology.
 Investments in advanced technology must be matched by this
“adoption capability” which is largely determined by the qualifications,
overall tacit knowledge and mobility of the labour force.
 This includes industry experts, scientists, and researchers.
22

NIS in USA vs. China
23

USA Actors: Public & Private
24
 The U.S. federal government has accounted for a tremendous share of national R&D spending over the past
half-century. Despite its tendency to concentrate in the defense and health sectors.
 A substantial amount of federal government support takes the form of funding for public universities and
government labs, with some federal subsidies specifically directed to research in high-impact areas. The
federal government also utilizes the Small Business Technology Transfer (STTR) programs to expand
public/private sector partnership opportunities and strengthen the role of small firms in federally funded
innovation activities.
 The principal de facto domains of federal policy are to provide the conditions for innovative activity in the
private sector by establishing a strong educational system, creating incentives for greater competition, and
helping solve market failures, such as the tendency of small and medium-sized businesses to under-invest in
research. Consequently, U.S. policymakers tend to favor market-based tools, such as corporate tax credits
that allow private firms to reduce marginal costs by permitting deductions for R&D expenditures. The U.S.
patent and copyright systems also help provide important incentives for innovation by increasing potential
returns to R&D activity and by protecting inventors.
 Political decentralization also allows for a greater degree of local control over the selection of policies to
pursue these objectives, thereby prioritizing pragmatic concerns over ideological positions when shaping
policy.
 While the United States does have a number of federal research labs, it has neither a federal innovation
agency nor a federal university system. State governments are therefore able to make strategic policy
decisions that affect large research institutions, giving them a greater degree of flexibility in matching direct
support to specific research objectives.
 Highly developed private capital markets play a crucial role in shaping the U.S. national innovation system,
providing support to small-scale entrepreneurs as well as large established firms. Over the past half-century,
private industry traditionally performed between two-thirds and three-quarters of U.S. R&D by value, and
though a significant portion of that activity was funded by the federal government, private partnerships and
investment banks represented the largest individual proportions of new capital commitments overall, in the
number of firms funded and in total capital provided.
 Venture capital restored its large role in funding new ventures during the first decade of the 2000s, and the
private sector remains a key component of the U.S. innovation economy.

China Actors: Public & Private
 In contrast to the political federalism and party competition that shapes public policy in the United States,
Chinese public policy is defined by a highly centralized political system under single-party control.
 During the 1960s and 1970s, it struggled through the Cultural Revolution, which eliminated nearly an entire
generation of. Over the following three decades, decentralization has given local authorities—including
those governing China’s Special Economic Zones, or SEZs—a significantly higher degree of autonomy, while
incremental regulatory reforms have enabled community-owned.
 Recent increases in domestic R&D spending were a response to public policies focused on building a
knowledge-based economy over previous decades of state-led development. Two of structural
transformations took place: 1) funding structure has gone from one centered on government activity to a
model that is enterprise-centered. 2) the performance of technological innovation itself has moved from a
two-actor model—divided between firms and government research institutions—to one led principally by
firms (mostly public).
 Public policy is still characterized by a high degree of central planning, a wide range of policy
inconsistencies, and the persistence of perverse incentives, but an important series of reforms have started
to alter these dynamics.
 In 1995: a new State Leading Group for Science, Technology & Education that would coordinate national
strategies for education policy and identify priority sectors areas for direct government support over the
following decade.
 In 2006: the government revised policy and made technological innovation a more central objective of its MLP;
to reduce Chinese dependence on imported technologies by supporting indigenous innovation, as well as to
enhance Chinese abilities to “leapfrog” existing technologies by concentrating on areas that offer opportunities
for breakthrough.
 An integrated network of private firms performs the majority of China’s R&D. In 2015, private firms
accounted for three-quarters of R&D investments. However, a majority of this activity is focused on applied
research and imitation or reproduction of foreign innovations. Moreover, the industrial networks
underpinning China’s national innovation system are characterized by uneven standards and a lack of
transparency, while the state continues to play a principal role in supplying research capital as well as
managing research institutions.
 The prevalence of state-owned enterprises also reflects the crucial role of the government in linking
technology producers and users in the presence of underdeveloped private capital markets, and because
many of the major Chinese financial institutions are also state-owned, it is significantly easier for state-
owned firms to obtain access to investment capital.
25

USA Research: Basic & Applied
 The America COMPETES Acts of 2007 and 2010 established a clear federal commitment to
increase—or at least stabilize—federal funding for scientific education and research initiatives, by
funding basic research at universities and by helping advance applied research goals at the newly
created Advanced Research Projects Agency for Energy (ARPA-E)
 At the state level, the National Science Foundation’s Experimental Program to Stimulate
Competitive Research (EPSCoR) has had a significant effect on increasing the funds made available
for individual states to support higher education in science and engineering, but further efforts
are needed to ensure that federal support is not too concentrated in specific sectors.
 There is compelling evidence that universities play a uniquely central role in many cases, due in no
small part to the ability of higher education to advance a country’s capacity for knowledge
generation. But moving successfully from invention to innovation requires that technologies go
beyond the laboratory and penetrate local and international markets. In the United States, several
government programs have been particularly important to this process.
 LICENSING In 1980, the U.S. Congress passed the University and Small Business Patent Procedure
Act—also known as the Bayh-Dole Act—permitting universities to license innovations that were
developed with federal funds. The Stevenson-Wydler Technology Innovation Act, passed during the
same year, did the same for research conducted at or in collaboration with federal laboratories.
Previous regulations had obligated the same researchers to transfer their intellectual property to the
federal government, complicating the process by which innovations reach consumers.
 SPINOFFS spinoff companies receive greater assistance with business concerns, such as raising
capital and reaching new markets, and as a result, many universities began to create technology
transfer offices (TTO) to assist with the commercialization of university research. Other studies have
showed the importance of allocating internal resources to support technology transfer, indicating a
strong positive correlation between spending on intellectual property protection and TTO business
development capabilities on the one hand and successfully obtaining patents (and eventually gaining
market share) on the other. There is also evidence that recruiting and training technology officers
with broad commercial skills can prove even more important than the broader set of financial
resources in development of successful spinoff firms.
26

China Research: Basic & Applied
 Given China’s relatively late technological development, it is not surprising that policymakers
perceive a need to focus on technological “catch-up” and have therefore favored policies that
promote applied research. But whereas U.S. universities are seen to play a moderating role
between government and industry, the Chinese stateled model of development gives the
government a central role coordinating between University industries and universities.
 China’s shift from labor- to capital-intensive production led the government to invest more in
higher education, and most major industries have a high level of interaction with the government
(particularly through state-owned financial institutions). These trends have two important
implications. First, the focus on applied research tends to produce a concentration of innovative
technologies in “terminal sectors” rather than serving as the foundation for subsequent
innovations in other areas. Second, since applied research goals tend to take precedence over
basic research, Chinese capabilities in the latter remain relatively under-developed.
 However, closer attention to basic research priorities in recent years has produced exponential
growth in the global share of Chinese scientific publications and enabled China to emerge as a
major player in critical new areas such as nanotechnology, where its position is second only to
that of the United States.
 Weak linkages among industry, research institutes, and universities have prevented knowledge
from being created and efficiently diffused among sectors. Although local industrial growth had
long been fueled by technology inputs from research institutes, and local industry did attract
scientific and engineering talent, research institutes were not able to compete successfully after
the reform, thereby depriving local industry of an important source of basic research
contributions.
 University-affiliated enterprises and spinoffs have generated controversy due to operational and
ownership problems, and some contend that the overall high concentration of applied research
and commercial activities within a university setting may limit the development of basic research
capabilities.
27

USA Innovation Objectives
 The production of technology.
 Creation of regional innovation clusters.
28

China Innovation Objectives
 Imitation to develop indigenous technologies.
 Clusters with foreign joint ventures.
29

Thank you!
30

Lecture 6.pptx

Recommended

Recommended

More Related Content

Similar to Lecture 6.pptx

Similar to Lecture 6.pptx (20)

Recently uploaded

Recently uploaded (20)

Lecture 6.pptx