Managing Innovation_innovation system

www.CeTIM.orgProf. Dr. Bernhard R. Katzy

Session 5: Innovation System

Prof. Dr. Bernhard Katzy

Winter 2011

http://www.cetim.org/

www.CeTIM.org 29. April 2023

Innovation Management

Prof. Dr. Bernhard Katzy

Basic innovation concepts

Innovation TheoryDominant theory, Main issues and developments of innovation research

Introduction based on life cases

Innovation PracticeHigh tech entrepreneurship…

Innovation System

Organization of innovation

Transformation and entrepreneurship

Innovation Governance Innovation


www.CeTIM.org Prof. Dr. Bernhard Katzy 39. April 2023

Session 5: an overview

- Mini-Test

- National innovation system and basic concepts

- Regional innovation system (what can we learn from Silicon Valley)

- Innovation cluster (the case of Galileo and SatNav)

- Summary

AGENDA



Session 5 :reading engagement

MINI-TEST



National innovation system

National Innovation system:

" the network of institutions in the public and private sectors whose activities and interactions initiate, import, modify and diffuse new technologies" <Freeman, C. 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 knowledge, skills and artefacts which define new technologies." <Metcalfe,J.S, 1995>




Friedrich List 's conception of "the national system of political economy" (1841)

ORIGIN OF NATIONAL INNOVATION SYSTEM THINKING

- The role of intellectual capital accumulation in national economic development

- The interdependence of tangible and intangible investment has a decidedly modern ring. Industry should be linked to the formal institutions of science and of education

- The independence of the import of foreign technology and domestic technical development




- German developed one of the best technical education and training systems in the world

- The Prussian government set up TechnicalTraining Institute (Gewerbeinstitut), made sure that they received imported British machine tools for reverse engineering and for training German craftsmen, who then disseminated the technology in German industry

- British craftsmen were also attracted to Prussia, as much of technology depended on tacit knowledge

- The german machine tool industry and machine-building proved capable of designing and manufacturing the machinery necessary to make steam locamotive in the 1840s and1850s

WHAT SET PRUSSIA ON THE ROAD TO OVERTAKING BRITAIN

IN THE LATTER HALF OF 19TH CENTURY




- The main factor in establishing the German chemical industry's leading position before and after the first World war.

- The major institutional innovation of the in-house industrial R&D department was firstly introduced in 1870

- As a result, Hoechst, Bayer and BASF have continued and strengthened this tradition down to the present day.

- After the second world war, the prestige of organized, professional R&D was very high, it was spread to other countries.

- It was a linear model of science and technology "push".

- The case of Atom bomb project

Basic physics - large-scale development in big labs- applications and innovations (whether military or civil )

THE RISE OF RESEARCH AND DEVELOPMENT




Increasing in R&D investment occurred in all industrial countries in the 1950s and 1960s, and even in the Third World Countries

Estimated gross expenditure on research and development as a fraction of GNP, 1934-1983

1934 1967 1983 1983Civil R&D only

USA 0.6 3.1 2.7 2.0

EC* 0.2 1.2 2.1 1.8

Japan 0.1 1.0 2.7 2.7

USSR 0.3 3.2 3.6 1.0

*Estimated weighted average of 12 EC countries.

Source: Freeman,Chris’ estimates based on Bernal (1939) adapted to “Frascati” definition (1963), OECD statistics, and adjustments to Soviet statistics based on Freeman and Young, (1965)




Evidence accumulated that the rate of technical change and of economic growth depended more on efficient diffusion than on being first in the world with radical innovation as much on social innovations as on technical innovations.

MORE FACTORS?

Japan USSR- Integration of R&D,

production, and technology imports at firm level

- Strong user-producer linkages

- “Kairetsu” Model

- Separate research institute within the academy system (for fundamental research), for each industry sector ( for applied research and development) and for the design of plant and import of technology.

- Weak links between these different institutions and enterprise-level R&D remained rather weak

- The user-producer linkages were very weak or almost non-existent in some areas of the Soviet Union.

Source: Summarized from Freeman’s idea (1995)




THE CONTINUING IMPORTANCE OF THE HOME MARKET

Factor conditions

Firm strategy, structure and rivalry

Demand conditions

Related and supporting industries

[M. Porter 1990]




- Innovation system dynamism is based on the organization of it's firms or their relationships to one another or local institutions.

- Organization precedes technology. It is precisely the openness, multiplicity and diversity of interconnections in Silicon Valley that allows economic actors to continually scan the environment for new opportunities and to invest in novel technologies, markets and applications with unprecedented speed.

- Regional advantage lies in an institutional environment that supports continuous innovation and collective learning – one that by it's very nature undermines technological trajectories or path dependency.

SAXENIAN'S IDEAS



Regional innovation system

“The institutional infrastructure supporting innovation within the production structure of a region" (Asheim and Coenen 2005)

- Silicon Valley

- Living lab and innovation system

REGIONAL INNOVATION SYSTEM

University

Business angle

Research institutes

Venture capitalists

Vocational training centre

Technology test centre

Technology transfer centre

Big companies SMEs

New ventures

ESAIncubator

NIVR

Cluster association

[Katzy and Crownston 2008, Competency rallying for technical innovation – the case of the Virtuelle Fabrik]

[Schuh, Katzy, Eisen 1997, Wie virtuelle Unternehmen funktionieren: Der Praxistest ist bestanden]



Regional innovation system- what can we learn from Silicon Valley

WHAT IS SILICON

VALLEY??

http://www.lucafiligheddu.com/wp-content/uploads/2008/09/siliconvalley.jpg




- a place you can point to on a map

- a planned phenomenon

- characterized by silicon or chips

SILICON VALLEY IS NOT




- 1,500 square miles- 35 Cities, 4 counties- 2.4 million people, 41 percent

foreign born- 1.2 million workers- 81 percent high school

diploma- 40 percent college degree

- 25 percent of workforce in high-skill occupations- Income average 60 percent

higher than US

- 6 percent US GNP, 11 percent of US patents

SO WHAT IS SILICON VALLEY?

Source: Silicon Valley index 2008 www.jointventure.org




MORE ABOUT SILICON VALLEY

Source: www.jointventure.org




- Market of Ideas?

- Market of Capital?

- Market of Talent?

- Or anything else?

WHERE THE VALLEY'S EDGE STEMS FROM




- 26% Bachelor's Degree and 18% Graduate or professional degree (Adult educational attainment)

- The area's universities are an important magnet for and source of highly skilled talent.

- Venture capital 2007 Q1-Q3: $5.9billion, the region receives almost 30% of the nation's total venture capital funding.

- the region's cities now account for 11 of the top 20 U.S. cities for patent registrations

DIAMOND MODEL OF SILICON VALLEY

Factor Conditions

Infrastructure

- The region is lagging other global regions in broadband speed and penetration Bay area 51%200kb/bits; Japan 65%256kb/bits; South Korea 94% 256kb/bits.




- Social health- Quality of education- Affordability of its housing- The upward mobility of its people- Quality of life

- Open business environment

- Decentralized organizational forms even as it grew

DIAMOND MODEL OF SILICON VALLEY

Firm strategy, structure and rivalry

Business environment




Network and relationships!!!

MORE SECRET INGREDIENT?




1980 1982 1984 1986 1987 1989

APOLLO AND SUN

Apollo Computer

Sun Microsystems

- Started in 1980 with pioneered workstation

- Poduska and his team from Prime computer

- Adopted proprietary standards

- Vertical integration

- Fell behind

- Sold to HP

- Founded in 1982

- Management team with a mix of experiences

- Adopted open system (UNIX)

- Limited specialization

- Cheaper, nonproprietary and half price than that of Apollo

- Commited 30% of R&D budget to RISC

- Poduska was replaced

- Surpassed Apollo



What can we learn from Silicon Valley

- High level of research capability

- Abundance of high-qualified manpower

- A pleasant business climate (business environment)

- The retention of enough funds (VCs)

- Diffusion of S&T and innovation culture is important in addition to having an open business climate (cooperation culture)

- Inducement of multinational companies or research institutes (anchor company's role)

- Networking and Entrepreneurship

KEY SUCCESSFUL FACTORS ARE IDENTIFIED



Innovation Cluster the case of GALILEO and SatNav

GALILEO

– The first satellite positioning and navigation system specifically designed for civil purposes

- Some EUR 3.4 billion to be invested

- 30 satellites to be launched and numerous ground equipment to be installed




- A market for equipment and services worth some EUR 200 billion per annum by 2013

- More than 100 000 new jobs in transportation, energy, environmental management, recreation …… are expected

- But how???

GALILEO




The findings we got so far

1) All the clusters show a weakness in market orientation-Demand creation

2) Different demand creation mechanisms were identified (ESNC, Innovation Voucher, Galileo Road Show……)

3) There is no “one-size-fit-all” demand creation mechanism

4) Require stakeholder’s involvement

INNOFIT




Key actors

THE STORY IN NETHERLANDS

Technical/ Scientific

Knowledge

Products/ Services

Demand

Ideas

?

-ESA- ESTEC-TUD-TNO-……

- TOMTOM- Dutch space- Logica- Other SMEs, and start ups

- NIVR

ESNC

Innovation

voucher




University

Business angle

Research institutes

Venture capitalists

Vocational training centre

Technology test centre

Technology transfer centre

Big companies

SMEs

New ventures

ESAIncubator

NIVR

Cluster association

Living lab

[Katzy and Crowston 2008, Competency rallying for technical innovation – the case of the Virtuelle Fabrik]

[Schuh, Katzy, Eisen 1997, Wie virtuelle Unternehmen funktionieren: Der Praxistest ist bestanden]




- Strengthen Anchor company's role

- Sub-clustering developed but different groups within don't know each other well.

- Positive innovation voucher, IPC

- Better integration between venture capital and early stage financing

THE STATUS QUO OF SATNAV IN HOLLAND



Summary

Category National innovation system

Sub-national innovation system (SIS)

Innovation Cluster

Focus - National level innovation process

- Regional level - Clustering- Innovation at

specific area

Major actors - National/local government, university, industry, public institute

- Local government, local university, local industry (SME), public institute

- Industry, university, public research institute

Policy Objective - National competitiveness - Regional competitiveness

- Competitiveness of cluster

Policy direction - Promoting interaction- S&T culture promotion- R&D investment and

management

- Involvement of local government

- More local contents into S&T policy

- Cluster establishment development

NIS, SIS AND INNOVATION CLUSTER

Source: www.unescap.org/tid/publication/indpub2507_chap3.pdf

http://www.unescap.org/tid/publication/indpub2507_chap3.pdf



Readings for session 6: Governance of Innovation

King/Gurbaxani/Kraemer/McFarlan/Raman/Yap (1994): Institutional factors in information technology innovation. In: Information Systems Research 5, 2: 139-169.


Managing Innovation_innovation system

Technology

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