Yanuar Nugroho, PhD.

Manchester Institute of Innovation Research – MIOIR/PRESTManchester Business SchoolThe University of Manchester

© March 2010

Systems of innovation and development policy: Some lessons learned

Pointers for discussion Indonesia in Motion

PPI-UK

19 March 2010

Contents

• What is innovation? • National Systems of Innovation• Modes of knowledge production and Triple Helix• Science &Technology in Development Policy Perspective• Some lessons learned• Concluding remarks

Innovation and creative destruction

Joseph Alois Schumpeter (1883 -1950) was an economist and political scientist. He popularised the term "creative destruction" in economics and lays out a clear concept of entrepreneurship. He distinguished inventions from the entrepreneur’s innovations. Schumpeter pointed out that entrepreneurs innovate not just by figuring out how to use inventions, but also by introducing new means of production, new products, and new forms of organisation. These innovations, he argued, take just as much skill and daring as does the process of invention.

Innovation by the entrepreneur, argued Schumpeter, leads to gales of “creative destruction” as innovations cause old inventories, ideas, technologies, skills, and equipment to become obsolete. The question is not “how capitalism administers existing structures, ... [but] how it creates and destroys them.” This creative destruction, he believed, causes continuous progress and improves the standards of living for everyone.

Innovation – Some basic concepts

• Innovation is usually understood to be distinct from invention. While invention is the first occurrence of an idea for a new product or process, innovation is the first attempt to carry it through into practice (c.f. ‘Creative Destruction’ – Schumpeter, 1934).

• Obviously they are closely linked and difficult to distinguish one from the other (Fagerberg, 2005).

• Literature on innovation is extensive and covers a wide range of topics , and studies on the role of innovation in economic and social change show a trend towards cross-disciplinarity. This reflects the fact that no single discipline is capable of dealing with all aspects of innovation.

• Innovation studies examine: Invention and “search” (e.g. research and development); Innovation (not just successful innovation); Implementation; Diffusion; Changed practices

Innovation – core categorisation

Innovation

Technological ServicesOrganisational Goods

Process Product Systems

National Regional Local

Technological Innovation – A classification

Series of Incremental Innovations

Radical Innovations

Revolutionary Innovations

Source: Freeman, 1997

(Tech.) Innovation – diffusion and adoption

Source: Rogers, 1995

ceiling

TIME

Early adopters, suppliers, designs

Late adopters, suppliers, designs

LEVEL

Competitive success not just based on quality of innovation: often issues of “complementary assets”

From niches and pioneering users to major markets

From “ridiculous idea” to “we always knew this was the next big thing”

National Systems of Innovation• Conceptualisations of socio-economic relations of science and

technology - National Systems of Innovation

• Origins of National Systems of Innovations• “systems” approach rooted in evolutionary economics – non-linearity,

learning, technology at the centre• Why- to understand the relative economic performance and

competitiveness of countries – similarities and differences – do they explain differences in national performance (Nelson, 1993)

• Freeman 1987– (Japan) NSI “the network of institutions in the public and private sectors whose activities and interactions initiate, import, modify and diffuse new technologies” i.e. processes of innovation

• Role of firms in national economy

Source: Flanagan & Barker PR6011

National Systems of Innovation• Foundations of National Systems of Innovation

• Lundvall 1992 – narrow (“searching and exploring”) and broad definitions – all parts and aspects of the economic structure and the institutional set up affecting learning as well as searching and exploring…production, marketing, finance sub-systems

• Nelson and Rosenberg 1993 – “a set of institutions whose interactions determine the innovative performance of national firms”

• Broad concept of innovation where the context is crucial –not just leading edge technological firms or world class research performers – but national technological capabilities and processes of transforming them into economic wealth

Source: Flanagan & Barker PR6011

Science, Technology Governance & Society• Links to Policy perspective

• Metcalfe 1995 – “that set of distinct institutions which jointly and individually contribute to the development and diffusion of new technologies and which provides the framework within which governments form and implement policies to influence the innovation process. As such it is a system of interconnected institutions to create, store and transfer the knowledge, skills and artefacts which define new technologies.”

• Motivations, incentives and interconnectedness

• Science & technology from the policy perspective• Changing dynamics of knowledge production?

Source: Flanagan & Barker PR6011

Conceptualisation of knowledge production

Source: Gibbons, et al., 1984; Shinn, 1999

Mode 1 Mode 2University as the main site of knowledge production

Socially-distributed knowledge production –university just one actor

Individual researchers Collaboration and teamsDisciplinary Trans-disciplinary‘Disinterested’ generation and validation of new knowledge

Solving problems in ‘context of application’

Peer review – autonomy Reflexivity and evaluation –social accountability

Science policy Innovation policy

Triple Helix: University-Industry-Government

The Triple Helix thesis states that the university can play an enhanced role in innovation in increasingly knowledge-based societies(Etzkowitz & Leydesdorff, 2000)

Three institutional spheres drive the global knowledge-based economic system: university, industry and government

Interactions between them shape them (dynamic) - inter-institutional relationsThree ‘dynamics’:1. Economic dynamics of the market2. Internal dynamics of knowledge production3. Governance of the interface

Firms not centre stage

Triple Helix: University-Industry-Government

• Triple Helix 1 – interaction across boundaries is mediated by organisations e.g. industrial liaison offices, strong direction by the state of relationships

• Triple Helix 2 – separate institutional spheres and control at the interfaces

• Triple Helix 3 – overlapping institutional spheres, interchange of roles and hybrid organisations

In one form or another, most countries and regions are presently trying to attain some form of Triple Helix III. The common objective is to realize an innovative environment consisting of university spin-off firms, tri-lateral initiatives for knowledge-based economic development, and strategic alliances among firms, government laboratories, and academic research groups

E & L, 2000

S&T in (Devp.) Policy Perspective – Rationales• “Policy for Science” (1945-1970)

• “Science, the Endless Frontier”(Bush, 1945)• S&T funded because unquestionably worthwhile, required for national security;

many decisions taken by industrial-military complex elites; • linear model of innovation – science as the motor of progress (without clear idea

of exactly how..)• big science and technology programmes, e.g. nuclear, aerospace (prestige)• Policy concerned with managing growth of science as determined by scientists in

their disciplines

• “Science in Policy” (1970-1980s) • an age of questioning – need for reform – energy crisis, “Limits to growth”• Brooks report (OECD 1971) Science, Growth and Society• recognition that science should support policy objectives of modern state, policy

not merely concerned with science itself• Social goal rationales move into the ascendancy – national well-being• science as a problem-solver• more demand than supply-led

Source: Flanagan PR6011

S&T in (Devp.) Policy Perspective – Rationales• “Research for Competitiveness and Innovation” 1980s, 1990s…?

• slow economic growth – need to relate science to national economic performance

• strategic science, “critical technologies”, focus on technology strengthening• Rise of large cooperative technological programmes leading to market failure• evaluation and foresight• integrate demand and supply – more systemic and network views abound –

about greater co-ordination

• Rationales for the new millennium? • Re-emergence of rationales for funding basic research (eg Japan)• Dominance of systems views founded in evolutionary economics• Support of networks (eg ERA, regional science policy)• Recognition of changes in institutions and global context of research

Source: Flanagan PR6011

Lessons learned• EU – strong research policy

• ‘Aho report’ criticising failure to meet Lisbon target• Triple Helix as norm, despite (heavy) criticisms

• BRIC – strong leadership• Clear technology policy (or at least, technological visions)• State plays a central role

• SEA – clear objective• Singapore: clear policy, lead by state, influenced by business, ‘supplied’ by

university; (civil) society left behind market; services and service industries• Thailand: policy transfer, referring to EU techno park as manifestation of TH

practices; strong role of government; central role of culture creative and services industry

• Malaysia: technology centre; strong role of government, high level of institutional coordination; high participation of (civil) society; but lacking systems at national level

• India – wide participation• Strong role of (civil) society, clear policy objective, facilitated by state, influenced

by brain circulation

What should public institutions do?• Governments and public institutions need to be ahead of the game

in understanding changes in the innovation process and to be fully aware of their potential.• It can enhance the efficiency and productivity of public services and

extend the range of those services and the way governments and public institutions engage with the public.

• Well-implemented systems can improve policy decision-making• Governments

• to develop the technical infrastructure to support innovation –(including research & development)

• to facilitate organisational infrastructure and collaboration skills to enable next generation innovation.

• Universities will become more entrepreneurial, but many will lag far behind the leading edge of innovative practice. Many will need to restructure their educational offerings considerably to provide the talent and skills necessary for new generation innovation.

Future matters – some conceptual issuesAll is about fallibility and uncertainties in the direction to which the society

progresses • From ‘Futures’ to ‘Foresight’ (~Innov. Tech) – arguments: • The discovery of the future is intertwined with recognition of the transformative

powers of Science, Technology and Innovation

• Imagining a better world: from Utopia (1516) to the New Atlantis (1627)• ‘Bravery’ in developing, combining methods

Thanks to Ian Miles

• Environmental and sustainability concerns are shared by all

• Changing socio‐economic patterns and environmental and sustainability concerns are tightly linked

• Financial crisis close to the core issuesTrends

BPS2008 – Map of trends 2008-2015

Source: Nugroho and Saritas, 2009

• The relationship between environmental and sustainability concerns, alternative energy sources, and the role of S&T is emphasised by all 

• Ageing population is a more shared concern

• Financial crisis becomes more peripheral for world regions

Trends

BPS2008 – Map of trends 2016-2025

Source: Nugroho and Saritas, 2009

• Climate change is right at the centre and becomes appreciated by all world regions

• More emphasis on the scarcity of natural resources

• No mention of financial crisis, globalisation, and new diseases and pandemics

Trends

BPS2008 – Map of trends 2025-beyond

Source: Nugroho and Saritas, 2009

Some reflections• Weaknesses of NSI approach

• Is national the right level? (multiple systems within one nation)• Links to globalisation?• How to measure (measure R&D expenditure, patents – or try to include

human element for skills and knowledge transfer)• Gives static not dynamic analysis• Gives explanations? Or a means of description?• What are key factors? (comparative analysis problems)• Has been too linked to views of information transfer and not knowledge

transfer

• Triple Helix: Political rhetoric or conceptual framework?

Concluding remarks• Innovation offers the prospect of generating more ideas, selecting

more efficiently from them and then developing them faster. Moreover, it increasingly offers the prospect of doing this not just for the biggest businesses but for its smaller ones and for its public services – improving quality of life and maintaining our economic edge in an increasingly competitive world.

• Increasing the speed and effectiveness of innovation adoption are not simple, nor do they offer quick wins. Indeed, it may not be obvious when they are succeeding. But the speed of the development of international competition based on innovation means that we have to quickly and cleverly use every tool available to its fullest advantage to improve innovation research and collaboration.

Thank you.