The changing face of innovation policy

Programme on Regional InnovationUniversity of CambridgeBelfast,17 June 2010

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The changing face of innovation policy

• Innovation: the conventional wisdom• A new framework for innovation policy

Map of GDP?

Regional Innovation Scoreboard (RIS) 2009

Medium-high innovators

High innovators Average innovators Medium-low innovators

Low innovators

Source: RIS (2009)

Innovation: the conventional wisdom

• The importance of high technology manufacturing• The importance of R&D• Importance of corporate laboratories and

protecting IP• The role of Universities– Technology transfer– Low level of university-business collaborations in

the UK

Innovation and growth: the (Solow) paradox

• “You can see the computer age everywhere these days, except in the productivity statistics". Robert Solow, 1987, (MIT, Nobel Laureate)

• Economic growth is not apparently correlated with innovation

The Innovation (Solow) paradox

• Answer? – Innovation takes time to have a major

impact on economic growth.

• Why?– It is the use of technology not the

generation of technology that has the biggest impact on growth

The innovation (Solow) paradox

• US Productivity growth 1995-2000: the three largest contributors to the productivity surge were, in order:– wholesale trade– retail trade– security and commodity brokers

(Solow, CMI Summit 2001)

Bentonville AR.

Innovation: how important is R&D?

‘This country’s success ultimately depends on a strong skills base and dynamic R&D both driving an innovative and competitive economy...... The Government will continue to play its part by stimulating R&D investment. The recent changes to the Research and Development Tax Credit, for example, will bring additional benefits to small, medium and large companies alike’.Lord Drayson, Minister of State for Science and Innovation,The 2008 R&D Scoreboard, pp. 2-3

How important is R&D?

• EU target of increasing research and development (R&D) to 3 per cent of GDP by 2010

• Illusive or elusive ‘externalities’?• Frequent failure to distinguish between ‘R’

and ‘D’• Many innovating firms do little or no R&D

Innovation expenditure per employee (£ in 2004)

From: Abreu, Grinevich, Kitson and Savona (2008), Taking Services Seriously, NESTA

Innovation expenditure per employee (£ in 2004)

From: Abreu, Grinevich, Kitson and Savona (2008), Taking Services Seriously, NESTA

Importance of corporate laboratories

• Conventional view is that innovation takes place within the corporate laboratory

• But most ideas and most expertise are outside the organisation

• Importance of being open• Importance of being connected• Importance of Knowledge exchange

Source: Chesbrough, 2006

The implications of open innovation

• Importance of developing networks and communities– It is not costless– Often difficult for individual businesses

• Develop ‘boundary spanners’ – people who understand partners and can manage relationships

• Utilise economic anchors – organisations that do not move– Universities and Hospitals (‘eds and meds’)

Innovation: the role of universities

• The ‘laissez faire’ model– Importance of chance, luck and serendipity

• The narrow model– Focus on a narrow range of technology transfer

mechanisms

• The wider model– Focus on a wide range of interactions– Exchange rather than transfer

The laissez faire model• Universities focussed on two missions – research and

education• Example: the ‘Cambridge Phenomenon’ initially

developed when the University took little active interest in business engagement. In the past:– University largely ignored IP issue– Adopted a liberal attitude to what academics did– Industrial liaison merely acted as ‘window’ on

what the university did – little exchange or dialogue

The standard narrow model

• Narrow focus on Technology Transfer• Mechanisms: Patents, Licenses, Spin-outs• Limitations

– Model is incomplete – Potential financial returns were frequently over-

estimated – Metrics distorting behaviour (Goodhart’s Law: any

observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes)

Commercialisation Activities of Academics

• Patents (7% of academics)• Licenses (5% of academics)• Spin- outs (4% of academics)

The wider model: multiple knowledge exchange mechanisms

• A ‘systems’ approach and not simply ‘market failure’• Educating people• Problem solving• Role of many disciplines (not just STEM)• Interactions with public and third sectors as well as with

business • Public space functions (Universities do not move)

– Relatively neglected, but distinctive– Includes networking, social interaction, meetings, informal

advice etc• Focus on exchange not simply ‘transfer’

5

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Licensedresearch

Patenting

Spun-outcompany Formed/run

consultancy

Commercialisation activities

Community-basedactivities

Lectures forthe community

Schoolsproject

Community-based sports

Publicexhibitions

People-based activities

Giving invitedlectures

Studentplacements

Participatingin networks

Standard-settingforums

Enterpriseeducation

Curriculumdevelopment

Attending conferences

Sitting onadvisory boards

Employeetraining

Format adapted from Ulrichsen (2009)

Academic Interactions with External Organisations

Source: Abreu, M., Grinevich, V., Hughes, A. and Kitson, M. (2009), Knowledge Exchange between Academics and the Business, Public and Third Sectors, Centre for Business Research, University of Cambridge, Cambridge.

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9Setting of physical facilities

Contractresearch

Consultancyservices

Externalsecondment

JointPublications

Prototyping and testing

Informaladvice

Researchconsortia

Hostingpersonnel

Jointresearch

Problem-solving activities

Licensedresearch

Patenting

Spun-outcompany Formed/run

consultancy

Commercialisation activities

Community-basedactivities

Lectures forthe community

Schoolsproject

Community-based sports

Publicexhibitions

People-based activities

Giving invitedlectures

Studentplacements

Participatingin networks

Standard-settingforums

Enterpriseeducation

Curriculumdevelopment

Attending conferences

Sitting onadvisory boards

Employeetraining

Format adapted from Ulrichsen (2009)

Academic Interactions with External Organisations

Source: Abreu, M., Grinevich, V., Hughes, A. and Kitson, M. (2009), Knowledge Exchange between Academics and the Business, Public and Third Sectors, Centre for Business Research, University of Cambridge, Cambridge.

Constraints on Collaboration

• Commonly cited constraints include:– cultural differences– disputes over intellectual property (IP)

• But, overall, these are not highly cited by in the businesses or academics

• Although they may be important for certain types of interaction

Academic and business perceptions of constraints on interactions

Source: Hughes, A. and Kitson, M. (2010), Connecting with the Ivory Tower: The Business Perspective on Knowledge Exchange in the UK, Centre for Business Research, University of Cambridge, Cambridge.

Innovation Policy: lessons from Europe

• Moderately superior comparators:– Schleswig-Holstein (Germany)– Wales (UK)

• Superior comparator:– Liguria (Italy)

• Significantly superior comparator:– Noord-Brabant (The Netherlands)

• Leading regions as target comparator:– Gothenburg (Vastsverige)– Southern Finland

A new framework for innovation policy

• Importance of local economic structure• Adopt a broad notion of innovation• Foster connectivity and openness• Importance of key regional economic

anchors• Develop a Triple Helix approach• Develop appropriate governance and policy

implementation

Importance of local economic structure

• Build on local strengths• Develop, transform and upgrade local

industries • More cost effective and a bigger impact then

developing new industries

Adopt a broad notion of innovation

• No simply about high technology manufacturing

• Importance of process• Importance of design• Importance of business practice• Importance of innovation in services and

‘traditional sectors’

A useful electronic device?

‘It has no camera; no USB port; no replaceable battery; no obvious advantage over a laptop, it doesn't support Flash’

Who would buy this?

Foster connectivity and openness

• Develop collaborative structures and communities

• Develop a professional skilled secretariat• Train ‘boundary spanners’• Networks must be outward looking and

inward looking• Move from giving grants to supporting

networks

Importance of key regional economic anchors

• Many economic actors move or can move– Skilled workers, businesses

• Importance of connecting to local economic ‘anchors’– Major employers, universities, hospitals

• Creates and embedded networked economy

High Tech Campus Eindhoven• In 1999, Philips decided to

concentrate all its innovation activities in one campus

• Since 2001 the campus has been open to other high-tech companies

• It operates under an “open innovation” policy

• Facilities are shared, and collaborations and knowledge exchange are encouraged

Develop a Triple Helix approach

• Triple Helix: foster and strengthen connectivity between business, universities and policy makers

• Fosters knowledge exchange and wider innovation

• Strengthens all partners and the local economy

ISH: Schleswig-Holstein

ISH: Schleswig-Holstein

• Public-private partnership• Foster and support collaboration between

academics and business to develop innovation• Provides (temporary) financial, institutional and

informational support• Supports development of facilities and

studentships in the regions’ universities• Objective is culture change and developing

long-term collaboration

The Triple Helix approach in Northern Ireland

• Northern Ireland has strong universities• The UK study of knowledge exchange in the

UK shows that academics from Northern Ireland engage in more knowledge exchange activity than academics from any other part of the UK

Governance and evaluation

• Collaborative structures need to be guided by the needs of business, academia and the policy community

• Focus should be long-term - and policy should not shift based on short-term changes or temporary

• Metrics should be concerned with innovation trajectories and behavioural change

Summary: Building a Networked Economy

• Importance of local economic structure – supporting key sectors – often large traditional sectors

• Role of key regional economic anchors– Universities, Hospitals, Large Businesses

• Importance of local culture and traditions• Importance of governance structures

– Policy must be long term– Impacts will take time– Importance of appropriate metrics

Summary Building a Networked Economy

• Building collaborative structures – between different businesses and with academia and government (Triple Helix approach)

• Structures must facilitate and manage relationships – providing finance/ grants is insufficient

• Importance of providing information on how to collaborate and the potential benefits