Public Administration and Innovation (0)

Preparing for exam .
Focus areas
Defining innovation

• “An innovation is an idea, practice , or object that is perceived as new by an individual or other unit of adoption.” (Rogers 1952)
  
• CIS survey : “Product innovations must be new to your enterprise, but they do not need to be new to your market ”.
  
• “ Companies achieve competitive advantage through acts of innovation. They approach innovation in its broadest sense , including both new technologies and new ways of doing things” – (Porter 1990)
  
• “An innovative business is one which lives and breathes “outside the box”. It is not just good ideas , it is a combination of good ideas, motivated staff and an instinctive understanding of what your customer wants” – (Branson 1998)
  
• “... novel implementation of an invention , discovery, new or existing knowledge in economic process ” (Joseph A. Schumpeter )
  
• An innovation is the implementation of a new or significantly improved product (good or service ), or process, a new marketing method , or a new organisational method in business practices , workplace organisation or external relations ” ( Oslo Manual ).
  

Innovation and entrepreneurship
Schumpeter on innovation: the role of inventions and entrepreneurs

• Innovation as “new combinations” of existing resources: “Innovation is possible without anything we should identify as invention and invention does not necessarily induce innovation, but produces of itself no economically relevant effect at all” (Schumpeter 1939, 59)
  

Innovations are produced by entrepreneurs:

• “the dream and the will to found a private kingdom, usually, though not necessarily, also a dynasty”
  
• the “will to conquer: the impulse to fight, to prove oneself superior to others, to succeed for the sake, not of the fruits of success , but of success itself,” and/or
  
• the “joy of creating, of getting things done, or simply of exercising one's energy and ingenuity” (Schumpeter 1934, 93)
  

Entrepreneurs – bearers of the mechanism of change
It is however the producer who as a rule initiates economic change, and consumers are educated by him if necessary ; they are taught to want new things which differ in some respect or other from those which they have been in the habit of using.” (Schumpeter 2002[1934], 65)
The Schumpeterian “Entrepreneur”: the person or organisational unit responsible for combining the factors necessary for innovation.
Schumpeter on economic development : a process of qualitative change, driven by innovation, taking place in historical time – the “entrepreneurial function”: the action of creating new combinations of existing resources.

• Schumpeter Mark I: focusing on individual entrepreneurs
  
• Schumpeter Mark II: innovation in large firms
  

Innovation diffusion : tendency for innovations to “ cluster ” in certain industries, areas and time periods à long waves in the world economy (Business Cycles, 1939)
Innovation is a continuous improvement process – involving different inventions/innovations
Innovation as a moving target
The linear model and alternative approaches; innovation research "generations"

• The linear model (Kline and Rosenberg, 1986): Research (science) → development → production → marketing
  

Problems:

• Generalising a chain of causation that only holds for a minority of innovations – disregarding important inputs (e.g. users’ experience)
  
• Ignoring feedback loops between the stages of the process
  

Typology of innovations

New product or service (product innovation): “This includes significant improvements in technical specifications, components and materials, incorporated software, user friendliness or other functional characteristics.” Oslo Manual 2005 The most innovative companies: Google, Amazon, Apple , Samsun, Tesla

Changes in production methods (process innovation): “is the implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software.” Oslo Manual 2005

Introduction of novel design solutions and sales methods (marketing innovation). “Is the implementation of an new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing” Oslo Manual 2005
A distinctive look for a product and appeal a new market segment ; Celebrity endorsements; personalized IS; New brand, etc. P.S. Seasonal, regular and routine changes.

Changes in the structure of the enterprise or in the ways of organizing work ( organizational innovation) “is the implementation of a new organisational method in the firm ’s business practices, workplace organization or external relations”. Oslo Manual 2005 P.S. Mergers and acquisitions!
National innovation system (NIS)
The national innovation systems approach stresses that the flows of technology and information among people, enterprises and institutions are key to the innovative process. Innovation and technology development are the result of a complex set of relationships among actors in the system, which includes enterprises, universities and government research institutes. For policy ­ makers, an understanding of the national innovation system can help identify leverage points for enhancing innovative performance and overall competitiveness. It can assist in pinpointing mismatches within the system, both among institutions and in relation to government policies, which can thwart technology development and innovation. Policies which seek to improve networking among the actors and institutions in the system and which aim at enhancing the innovative capacity of firms, particularly their ability to identify and absorb technologies, are most valuable in this context. The measurement and assessment of national innovation systems has centred on four types of knowledge or information flows: 1) interactions among enterprises, primarily joint research activities and other technical collaborations; 2) interactions among enterprises, universities and public research institutes, including joint research, co­-patenting, co-­publications and more informal linkages; 3) diffusion of knowledge and technology to enterprises, including industry adoption rates for new technologies and diffusion through machinery and equipment; and 4) personnel mobility, focusing on the movement of technical personnel within and between the public and private sectors. Attempts to link these flows to firm performance show that high levels of technical collaboration, technology diffusion and personnel mobility contribute to the improved innovative capacity of enterprises in terms of products , patents and productivity. There are many different approaches to analysing national innovation systems. Firm­ level innovation surveys question enterprises on their sources of knowledge most relevant to innovation and allow a ranking of different linkages by industrial sector and country . Cluster analysis focuses on the interactions between particular types of firms and sectors, which can be grouped according to their technological and networking characteristics. Patterns of knowledge flows can differ markedly from cluster to cluster and also within countries specialised around different industrial clusters (e.g. forestry, chemicals). Innovation systems can also be analysed at different levels: sub­regional, national, pan-­regional and international. While the national level may be the most relevant due to the role of country­ specific interactions in creating a climate for innovation, international technology flows and collaborations are taking on growing significance. Future research will focus on improving the indicators used to map interactions in national innovation systems as well as the linkages to the innovative performance of firms and countries. These indicators are at an early stage of development and do not approach the robustness of more conventional measures such as R&D expenditures. A main goal is to improve the comparability of studies across countries by encouraging those engaging in analysis of innovation systems to focus first on measuring a core set of knowledge flows using similar indicators. At the same time, specific analyses will be directed to deepening the understanding of certain types of flows in national innovation,namely: human resource flows;2) institutional linkages; 3) industrial clusters; and 4) innovative firm behaviour.
Benchmarking NIS
Learning from foreign systems of Innovation (Tidd et al, 2005)

• Reasons for monitoring and learning from the development of technological, production and organisational competences of foreign NSI:
  
  • Sources of competition in innovation
    
  • Sources of improvement in corporate management
    
  • Sources of technology
    
• Benchmarking: comparisons amongst competitor companies on specific dimensions of corporate performance aiming to identifying and catching up with best practice:
  
  • Information-gathering – manufacturing , patents, technology, organisation, product development, R&D, customer-facing (service, marketing and sales, logistics)
    
  • Learning and imitation – independent R&D, reverse engineering and licencing
    
• Appropriating the benefits of investment in technology:
  
  • Capacity to translate technological advantage into commercially viable products and processes (commitment of complementary assets in production and marketing)
    
  • Capacity to defend advantage against imitators ( patent protection)
    

Sectoral system of innovation: definition, types
A sector is a set of activities that are unified by some related product group for a given or emerging demand and that share some basic knowledge. Firms in sectors have commonalities and at the same time are heterogeneous. Innovation in sectors has relevant systemic features .

• Knowledge and technologies;
  
• Actors and networks ;
  
• Institutions
  

Examples of sectoral system of innovation from different countries: knowledge inputs, actors, networks, institutions ( based on group work presentations)
South –Korea, Electronics - knowledge base came from subcontracting and original equipment manufacture, access foreign export channels and engage in catch-up learning, imitation and innovation. Long experimentation over details in the manufacturing process → firm-specific pattern of knowledge.
Ministry of Science and Technology (MOST) - dedicated to technological development and coordination of technology-related activities in the country
Innovative enterprises and the importance of "wider look at innovation"
“my main job is to promote innovation” Positive encouragement
“create the right framework , the right mindset”
“senior leaders to create an environment of friendliness, courtesy, encouragement and helpful attitudes to ...
innovative ideas” A tolerance for failure
“You have to accept that [failure], take it for what it’s worth, learn from it and move on.”
Patience
“Patience is needed as well when it comes to innovation”
Synchronizing innovation and business strategies
Celebrate an innovation culture
■ “Of our four core values at Nokia, one is a Passion for Innovation. That’s very much highlighted in communications with employees, we discuss the values frequently with our people. In that way we live our dreams under that value, a Passion for Innovation.”
■  “BeQIK,be better, be Bosch.”
■  „We certainly have been successful, in part , because we
never accept the status quo, we never accept conventional thinking, conventional wisdom. When you look at the points in the history of our company where we have made the biggest difference, in almost every case it was where everybody, almost all the experts, thought that we were doing something stupid.“
Critical success factors in innovation
Human resources:

• New doctorate graduates per 1000 population aged 25-34
  
• Percentage population 30-34 having tertiary education
  
• Percentage youth aged 20-24 having attained at least upper secondary level education
  

Open, excellent and attractive research systems

• International scientific co-publications per million population
  
• Scientific publications among top 10% most cited publications worldwide as % of total scientific publications of the country
  
• Non-EU doctorate students as a % of all doctorate students
  

Finance & Support

• R&D expenditure in the public sector as % of GDP
  
• Venture capital investment as % of GDP
  

Firm activities

• R&D expenditure in the business sector as % of GDP
  
• Non-R&D innovation expenditures as % of turnover
  

Linkages & Entrepreneurship

• SMEs innovating in-house as % of SMEs
  
• Innovative SMEs collaborating with others as % of SMEs
  
• Public-private co-publications per million population
  

Intellectual assets

• PCT patents applications per billion GDP
  
• community trademarks per billion GDP
  
• Community designs per billion
  

Outputs
Innovators

• SMEs introducing product or process innovations as % of SMEs
  
• SMEs introducing marketing or organizational innovations as % of SMEs
  
• High growth innovative firms
  

Economic effects

• Emp loyment in knowledge- intensive activities (manufacturing and services ) as % of total employment
  
• Contribution of medium and high-tech product exports to the trade balance
  
• knowledge intensive services exports as % total service exports
  
• License and patent revenues from abroad as % of GDP
  

“The innovative firm thus has a number of characteristic features which can be grouped into two major categories of skills :

• strategic skills: long- term view; ability to identify and even anticipate market trends; willingness and ability to collect, process, and assimilate technological and economic information;
  
• organisational skills: taste for and mastery of risk; internal co-operation between the various operational departments, and external co-operation with public research, consultancies, customers and supplier ; involvement of the whole of the firm in the process of change, and investment in human resources.”
  

(- European Commission (1996), Green Paper on Innovation, Bulletin of the European Union, Supplement 5/95, Luxembourg. In the Oslo manual (2005): http://www.oecd.org/sti/inno/2367580.pdf )
Innovation strategies: proactive, active, reactive, passive
Innovation audit : some key focus areas
Technology and innovation audit tools (selecting innovative capability) (Dogson et al, 2008):
Technology and innovation audit tools help firms assess their current position : you need to know where you are before you decided where you need to get. In the formulation and implementation of the Innovation Strategy innovation audit is found within the selection capability (choosing among future options of technologies, opportunities, etc. according to the firm’s resources and corporate strategy)

• Technology audit tools: benchmarking and assessing technological strengths (qualitatively – quantitatively) – analysing factors (comparative quality and productivity of researchers, range and depth of patent ownership, operations productivity)
  
• Innovation audit tools: assessing resources for innovation; innovative capabilities; innovation processes (e.g. thinkplaydo.com, http://www.innovationforgrowth.co.uk/What%20are%20innovation%20audits.pdf )
  

Innovation audit is an in-depth analysis of different aspects of an organisation’s current innovation capabilities, procedures and processes, examining key indicators, determining strengths and weaknesses . The result of the audit will highlight barriers to innovation, as well as identify improvements or new methods to maximize innovation capabilities.
A system failure framework for innovation policy
A system failure framework for innovation policy design
“...it is setting the framework conditions in which innovation systems can better self‐organize across the range of activities in an economy. / ...the systems failure approach leads to instruments that enhance innovation opportunities and capabilities. Because systems are defined by components interacting within boundaries, it follows that a system failure policy seeks to address missing components, missing connections and misplaced boundaries” (Metcalfe 2004)
Rationale for innovation policy intervention ’
to improve the business environment
or to alter the structure of economic activity toward sectors, technologies or tasks that are expected to offer better prospects for economic growth or societal welfare than would occur in the absence of such intervention.
Innovation policy measures: demand and supply sides
Supply-side:
Finance
Equity support – public venture capital funds Mixed or subsidized private venture funds, Loss underwriting and guarantees Tax incentives
Fiscal measures - Corporation tax reduction for volume or increment in R&D Reductions in employers payroll tax and social contributions Personal tax incentives for R&D workers.
Support for public sector research – University funding laboratory funding Collaborative grants, Strategic programmes for industry Support for contract research Equipment sharing.
Support for training & mobility – Tailored courses for firms Entrepreneurship training, Subsidised secondments, Industrial research studentships, Support for recruitment of scientists.
Grants for industrial R&D- Grants for R&D, Collaborative grants, reimbursable loans, Prizes to spend on R&D
Service
Information and brokerage support – Contact databases , brokerage events, advisory services, international technology watch, Patent databases, Benchmarking
Networking measures – support for clubs, foresight to build common visions, co-location in incubators, Science-parks etc.
Demand-side measures
Systemic policies – cluster policies, Supply chain policies,
Regulation – use of regulations & standards to set innovation targets, Technology platforms to coordinate development.
Public procurement – R&D procurement, Public procurement of innovative goods .
Support of private demand – Demand subsidies, Tax incentives, Articulation of private demand, Awareness and Training Catalytic Procurement
Examples of innovation policy measures to develop specific sectors in different countries (based on group work presentations)
South Korea’s example
UNIVERSITIES
OTHER GOVERNMENT RESEARCH INSTITUTES ( GRIs )
GOVERNMENT & REGULATION
BUSINESS ORGANIZATION
•The chaebol system, that seems to have been a driving force in the success of Korean electronics industry, has over time also revealed its glaring weaknesses. There is widespread demand to move beyond the chaebol system and towards more “economic democracy” – a stated goal of Park Geun-hye on which she has recently been backtracking (FT 2012; Nam 2015; SGI 2015).
•Because of its intricate and interdependent relationship with the state, the system is highly prone to corruption. Because of their size , preferred regulatory status and vertical structure, chaebols tend to suffocate competition from smaller and emerging companies. Most of the supply chains of the chaebols are in-house (the effectiveness of which is getting high praise ) and when external suppliers are used, chaebols have so much power over them that any independent development is almost impossible. (Marlow, 2015)
•In the past the state has made efforts to make chaebols more efficient by forcefully restructuring them. By now it is clear that this will not be enough. The state has realised that it needs to limit the economy’s dependence on large companies. Also, in order to stay competitive, there needs to be a general shift away from hardware and towards services. (Mundy, 2014)
•There have been government initiatives launched to foster the start-up model of business, especially when it comes to funding (the largest financing mechanism is Growth Ladder Fund, with about $2.7bn in assets), but generally the regulatory and business environment is still considered too rigid, conservative and geared towards large conglomerates to bring about any substantial change. (Jung-a, 2014)