Business Innovation ques

Hunnysid

ENT202_W3_LectureHandouts.pdf

Home >Business & Finance homework help >Management homework help >Business Innovation ques

Slide 1

ENT202 / Innovation: Strategies and Systems

Week 3: National and Regional Systems of Innovation

College of Business and Law

Karmen Lužar

__________________________________________________________________________________

________________________________________

Slide 2

Recognition of Traditional owners and Indigenous cultures

Charles Darwin University acknowledges the traditional custodians of the land on which we’re meeting and pays respect to Elders both past and present and extends that respect to all Aboriginal and Torres Strait Islander people.

__________________________________________________________________________________

________________________________________

Slide 3

Defining National Systems of Innovation (NSI) • Innovation is the key driver for economic growth in

developed countries.

• A key element to competitiveness in the knowledge based economy is ''interconnectedness“ = linkages.

• NSI = all economic, political and other social institutions affecting learning, searching and exploring activities. This includes a nation’s universities and research bodies, financial system, its monetary policies, and internal organisation of private firms.

__________________________________________________________________________________

________________________________________

Slide 4

‘National’ in NSI

• National: limits or boundaries of the nation.

• The elements of shared culture, territory and devolved ad- ministrative and/or political organisation provide important dimensions of the institutional setting for innovation and other relevant policy development.

• Countries also differ in the degree of cultural diversity and the degree of political centralisation.

• Within NSIs there are more or less developed Regional Systems of Innovation (RSIs).

__________________________________________________________________________________

________________________________________

Slide 5

NSIs with regions - examples

__________________________________________________________________________________

________________________________________

Slide 6

‘National’ in NSI cont.

• Knowing NSI allows governmental policies to support and not impede the innovation processes.

• Diverse NSIs, and they work differently. – The need to avoid naïve copying and instead develop a realistic understanding of the workings of the “real market economies” in relation to innovation.

• Performance: consideration for allocation of limited resources, adaptability of the system, labour force. The performance indicators of NSI should measure the efficiency and effectiveness in producing, diffusing and exploiting economically useful knowledge. E.g. patents.

__________________________________________________________________________________

________________________________________

Slide 7

‘System’ in NSI

• Systematic: comprising of elements of consequence to in- novation and relationships amongst them.

• These relationships involve users and producers of new knowledge exploited for practical (including commercial) use.

• Interaction is a dynamic social process, involving feedback at different points in the innovation process including knowledge development, diffusion and deployment.

• Learning is a central activity of the system of innovation.

__________________________________________________________________________________

________________________________________

Slide 8

‘System’ in NSI cont.

• 2 angles:

a) An innovation system in abstract modelling terms includes key organisational elements and linkages between them.

- University research, research institutes, technology-transfer agencies, consultants, skills-development organisations, public and private funding organisations and, of course, firms, large and small, plus nonfirm organisations involved in innovation are the main elements of a system.

- Linkages can be specified in terms of flows of knowledge and information, flows of investment funding, flows of authority and even more informal arrangements such as networks, clubs, fora and partnerships.

__________________________________________________________________________________

________________________________________

Slide 9

‘System’ in NSI cont.

• 2 angles:

b) Edquist ( 1997) has tended more towards the study of operational systems.

- Accounts of actually existing elements and relationships to determine the extent to which they constitute systems on the assumption that the interactive model supersedes the linear model of innovation in practical, operational terms.

- Massive complexity of researching this at national level -> scaling down to regional profiles.

__________________________________________________________________________________

________________________________________

Slide 10

‘Innovation’ in NSI

• Innovation: a key element in a national economic growth.

• In pre-industrial societies: innovation = extraordinary events, temporary disrupting the equilibrium.

• In modern capitalism, innovation is a fundamental and inherent phenomenon. This posits an ongoing process of learning, searching and exploring, which results in: • New products and processes;

• New forms of organisation;

• New markets.

• As such innovation can be regarded as a “new use of pre- existing possibilities and components.”

__________________________________________________________________________________

________________________________________

Slide 11

‘Innovation’ in NSI

• Innovation as a process.

• Interactive learning and collective entrepreneurship are fundamental to the process of innovation.

• Economic structure and institutional set-up form a framework, and affect process of interactive learning, which sometimes results in innovations.

• Innovations can be of technological or non-technological nature, and also differ in terms of novelty and impact.

__________________________________________________________________________________

________________________________________

Slide 12

Friedrich List (1841)

• The National System of Political Economy

• First systematic and theoretically-based description of NSI

• Focus on development of productive forces

• Indicated the need for government’s responsibility for education and training, and for developing an infrastructure supporting industrial development

__________________________________________________________________________________

________________________________________

Slide 13

Christopher Freeman (1987)

• Japan as an economic superpower

• The first explicit use of the concept ‘NSI’

• The concept refers to nation-specific organisation of subsystems and the interaction between sub-systems

• Focus on the interaction between the production system and the process of innovation

• Theoretical application of organisation and innovation theory, i.e. which organisational forms are most conducive to the development and efficient use of new technology

• Key concepts: • Organisation of R&D • Organisation of production in firms • The inter-firm relationships • The role of government

__________________________________________________________________________________

________________________________________

Slide 14

Richard Nelson (1987)

• US system

• Combined private and public character of technology

• The role of private firms, government and universities in the production of new technology

• Different industry sectors use different methods to appropriate benefits from their innovations

• Focus on the production of knowledge and innovation (innovation system in the narrow sense)

• Theoretical focus on law and economics, i.e. how well can different institutional set-ups take into account and solve public-private dilemma of information and technical innovation

__________________________________________________________________________________

________________________________________

Slide 15

Michael Porter (1990)

• 4 determinants affecting competitiveness of a national industry: • Firm’s strategy

• Factor conditions

• Demand conditions

• Supporting industry

• Constellation of these determinants is a system, and the system most strongly works on a national, rather than international/global level.

• National systems as environments to single industries involved in international competition.

__________________________________________________________________________________

________________________________________

Slide 16

Bengt-Åke Lundvall (1992)

• Based on the Danish IKE-group work (studying industrial development and international competitiveness of the Western world)

• Focus on interactive learning and innovation

• 2 fundamental assumptions:

1) Knowledge is the most fundamental resource in the modern economy. Learning is therefore the most important process.

2) Learning is predominantly interactive/socially embedded process, which cannot be understood without taking into consideration its institutional and cultural context.

- affected by the internationalisation and globalisation

__________________________________________________________________________________

________________________________________

Slide 17

Bengt-Åke Lundvall (1992) cont.

• NSIs differ because economies differ in terms of structure of the production system and institutional set-up Histories, language and culture will be reflected in: • Internal organisation of firms (e.g. sales, production and R&D)

• Inter-firm relationships (i.e. competition, user-producer co- operation)

• Role of the public sector (user of innovations->regulations)

• Institutional set up of the financial sector

• R&D intensity and organisation (resources, competencies and structure)

• Acknowledges the importance of a national education and training system, but does not develop the concept further

__________________________________________________________________________________

________________________________________

Slide 18

NSI definitions

• …set of institutions which are more directly concerned with scientific and technical activities (Freeman, 1992).

• …the network of institutions in the public and private sectors whose activities and interactions initiate, import, modify and diffuse new technologies (Freeman, 1995).

• …the elements and relationships which interact in the production, diffusion and use of new, and economically useful, knowledge ... and are either located within or rooted inside the borders of a nation state (Lundvall, 1992).

• ... a set of institutions whose interactions determine the innovative performance ... of national firms (Nelson, 1993).

__________________________________________________________________________________

________________________________________

Slide 19

Regional Systems of Innovation (RSI) • Different institutional settings will be likely to give rise to

distinctive conventions or forms of collective social order leading to the establishment or enhancement of different kinds of organisations and even microconstitutional regulation.

• This 'social capital' determines the posture and direction of practical action and hence the evolutionary processes of the region.

__________________________________________________________________________________

________________________________________

Slide 20

Types of regions institutionally

• Regional evolution in institutional terms:

1. Cultural regions: have evolved distinctive governance structures within a state, but have not officially become states. E.g. the Basque Country, Scotland.

2. Administrative regions: some degree of policy making and political capacity. E. g. Australian states, Länder in Germany.

• Two key processes underlying the designation of regions: regionalisation (Hadjimichalis, 1986) and regionalism (Harvie, 1994).

• Three key institutional forms crucial to RIS capacity to facilitate systemic innovation at regional level: financial, learning and productive 'cultures’.

__________________________________________________________________________________

________________________________________

Slide 21

Regionalisation vs. regionalism

__________________________________________________________________________________

________________________________________

Slide 22

RSI and financial capacity

• The financial sector is of strategic importance when a system of innovation is formed.

• Firms' financing habits vary from one country to another.

• Zysman (1983 ): three categories of financial systems:

a) a system oriented to the market, where funds are allocated in a developed capital market;

b) a system based more on credit, with considerable government regulation and control;

c) a system based on credit, with extremely little control and regulation.

__________________________________________________________________________________

________________________________________

Slide 23

RSI and financing cont.

• The lender's lack of information on a project for which a loan may be granted sometimes causes difficult situations.

• In the case of innovation, the main problems stem far more from the uncertainty created between the two parties than from the variations in the interest rate.

• Regional policies to aid financing for innovation should mainly be directed to making better relations possible between the parties by minimising uncertainties.

• For that, it is important to create flows of information needed by the parties so that the financing for innovation can be successfully carried out.

__________________________________________________________________________________

________________________________________

Slide 24

Regional budgets

• A region's capacity to mobilise its innovative resources is linked to the regional government's budgetary availability.

• Three types of regional spending capacity based on central government scope of jurisdiction relation:

• Decentralised spending;

• Autonomous spending;

• Regions with authority to impose taxes.

__________________________________________________________________________________

________________________________________

Slide 25

Infrastructure financing

• Infrastructures constitute the physical make up of the regional space and make possible the multiple relations that are established between the different agents in a regional economy.

• Two types of infrastructures:

a) telecommunications infrastructures and infrastructures which are vital to innovation in the strictest sense of the term, for its creation as well as diffusion;

b) infrastructures needed to create resources assigned to innovation, i.e. communications networks linking different parts of the region or one region to others.

__________________________________________________________________________________

________________________________________

Slide 26

Infrastructure financing cont.

• Most regions do not have the budgetary capacity to construct basic infrastructures (e.g. airports), but they do have various degrees of influence (e.g. local telecommunications networks).

• Investment for executing infrastructures can also be shared (development of technological parks) or independent (e.g. intelligent buildings).

• Furthermore, the density and quality of infrastructures for innovation in the region are also extremely important.

__________________________________________________________________________________

________________________________________

Slide 27

Learning and innovation

• Porter (1990): Business 'clusters’ = institutionalised linkages between firms and innovation support infras- tructures and among firms. His emphasis, however, is more upon national competitiveness than that of regional economies and his methodology highlights clusters which are globally competitive.

• From a systems perspective, Porter’s most important insight is that cooperation is the key to much of the success of accomplished clusters and is strongly associated with competitive advantage.

__________________________________________________________________________________

________________________________________

Slide 28

Learning and innovation cont.

• An innovative regional cluster is likely to have firms with: access to other firms in their sector as customers, suppliers or partners, perhaps operating in formal or informal networks; knowledge-centres such as universities, research institutes, contract research organisations and relevant technology-transfer agencies; a governance structure of private business associations, chambers of commerce and public economic development, training and promotion agencies and gov- ernment departments.

• Such organisations are called associative.

__________________________________________________________________________________

________________________________________

Slide 29

Learning and innovation cont.

• Regional learning system: A systemic, i.e., regular, two-way, interchange on matters of importance to innovation and the competitiveness of firms.

• Adding the financial capacity, through the existence of the financial infrastructure needed to enable firms to gain the necessary venturing finance and invest the necessary capital to generate innovation, we may speak of a regional innovation system.

__________________________________________________________________________________

________________________________________

Slide 30

Learning and innovation cont.

• Learning may have specifically regional content. However, the technological capacity of a system of innovation stems from the existence of interactive learning. Therefore, if governments wish to exert influence to improve systems' technological and innovation capacity, they will be forced to develop policies which support learning processes.

• Lundvall and Johnson (1994): ‘Learning economy'

__________________________________________________________________________________

________________________________________

Slide 31

Learning and innovation cont.

• Tacit knowledge exchange: Learning organisations engage in vertical and horizontal networks, exchange personnel and generally improve communication between innova- tion actors. -> innovation-based competitive advantage.

__________________________________________________________________________________

________________________________________

Slide 32

Productive culture cont.

• Culture is in essence the value system which is shared by members of a local or regional area. It is the distinctive characteristics of the patterns of information processing of a community located in a particular place.

• The 'culture of cooperation' is learned but is also reinforced by a certain history and by links that are not only determined by economic regions, but which may be motivated by cultural, political or ideological reasons.

__________________________________________________________________________________

________________________________________

Slide 33

Productive culture

• A productive region is made up of a set of related systems. The link between the productive system (mainly firms) and the social system determines the type of development in the region.

• In decades after the WWII, large firms played a key social role in relation to workers (furnishing schools, health facilities, training centers, housing, supermarkets, etc.).

• Adaptation to new technologies depended on the training system's capacity, but also on the workforce's motivation to carry out reconversion.

__________________________________________________________________________________

________________________________________

Slide 34

Productive culture cont.

• The cultural aspects most closely linked to 'systemic qual- ity' in an innovation system are:

• culture of cooperation

• associative culture

• learning culture

• experience and ability to carry out or incorporate institutional changes

• coordination and public/private consensus

• productive culture

• labour relations

• cooperation at work

__________________________________________________________________________________

________________________________________

Slide 35

Productive culture cont.

• company commitments to social well being

• productive specialisation

• existing interface mechanisms in scientific, technological, productive and financial field

• different types of learning capacity

• social valorisation of the use of science

• university linked to the productive system

• non-bureaucratised educational and training system linked to the productive system

__________________________________________________________________________________

________________________________________

Slide 36

Productive culture cont.

• Granovetter (1985): 'weakness of strong ties’ and 'strength of weak ties’

• Trust-building is of the essence. Breach of trust is fatal to the successful functioning of systemic interaction.

• Not all regions have this capability even though many have some economic competencies, including aspects of innovation support and policy.

• Systemic innovation implies the loose coupling of subsystems, i.e. finance, learning and productive culture.

__________________________________________________________________________________

________________________________________

Slide 37

Bibliography

• Cooke, P, Uranga, M, G & Etxebarria, G 1997, ‘Regional innovation systems: Institutional and organisational dimensions’, Research Policy, vol. 26, pp. 475-491.

• Lundvall, B 2010, National Systems of Innovation: Toward a Theory of Innovation and Interactive Learning, Anthem Press.

• Roos, G, Fernström, L & Gupta, O 2005, ‘National innovation systems: Finland, Sweden & Australia compared; Learnings for Australia’, Australian Business Foundation.

__________________________________________________________________________________

________________________________________

Slide 38

Questions

• Explain the concept of National Systems of Innovation (NSI).

• Who are the key theorists of the NSIs?

• What are the key dimensions of the concept Regional Innovation System (RSI)?

• What is the difference between regionalisation and regionalism approach to RSI?

• Explain the financing related to RSI.

• Why does learning represent a strategic element in any innovative process?

• How does productive culture/institutional setting influence innovation?

__________________________________________________________________________________

________________________________________

Slide 39

Next week…

• Triple Helix Systems of Innovation

• Tutorial reading for today (read before the tutorial): Roos, G, Fernström, L & Gupta, O 2005, ‘National innovation systems: Finland, Sweden & Australia compared; Learnings for Australia’, Australian Business Foundation.

• Tutorial week 4: Presentations (Assignment 1)

__________________________________________________________________________________

________________________________________