Innovation System

1. Innovation System Shahid Beheshti University of Medical Sciences School of Medical Education Strategic Policy Sessions: 06

2. Industrial vs. Knowledge-Base Economies • Since the beginning of the 1970s, the most advanced economies in the world have been undergoing structural change, turning them from industrialized economies based on labor, tangible capital and material resources into economies based more and more on the creation, diffusion and exploitation of new knowledge. • One of the fundamental characteristics of this shift is the structural intensification of research activities.

3. Knowledge as a Strategic Asset • In the emerging ‘knowledge-based economy’, also called ‘learning’ economy, economic growth depends more directly on investment in knowledge, which increases productive capacity, than on traditional factors of production (Lundvall and Johnson, 1994). • In other words, knowledge raises the returns on and the accumulation of other types of investment (Nelson and Romer, 1996).

4. Definitions of Knowledge-Based Economy • APEC: a KBE is an economy in which the production, distribution and use of knowledge are the main drivers of growth, wealth and employment across all industries. • OECD: where investment in knowledge is defined as public and private spending on higher education, expenditure in R&D and investment in software.

5. Timing of Adoption • It often takes a long time for Technology to move from lab. to commercial value: • Freon refrigerants - 1 year • Zipper - 27 years • Mechanical cotton picker - 53 years • Fluorescent lamp - 79 years

6. Shortening of cycles of late innovations: Spread of successive technologies in the US automobile industry Percentage of output incorporating the innovation

7. The Geographic Outspreading of Technologies as They Mature

8. The Importance of Systems • Despite similarly large investments in R&D by various industrialized and semi-industrialized countries starting in the 1950’s and 60’s “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 innovations and as much on social innovations as on technical innovations” (Freeman, 1995).

9. Tacit vs. Codified knowledge • Codified scientific and technological information, are disembodied knowledge (in articles, blueprints, patents, software and databases), a so-called “nonrival public good” • Tacit knowledge (skills, competencies, routines) is acquired through experience (learning, producing, researching) and consists of the accumulation of human skills and techniques.

10. Propositional and Prescriptive Knowledge • Knowledge that catalogues natural phenomena and regularities (“knowledge of what”), which is called propositional knowledge. • Knowledge that prescribes certain actions that constitute the manipulation of natural phenomena for human material needs (“production”) and which is called prescriptive knowledge.

11. Discovery vs. Invention • When an addition is made to the base of propositional knowledge, it is typically called discovery. • When an addition is made to the base of prescriptive knowledge, it is typically called invention. • When prescriptive knowledge is carried out, it is termed production. • In prescriptive knowledge, there is always a tacit component.

12. Technology • Technologyis the know-how on how to apply scientific knowledge. As such it belongs to a larger group of activities which embrace the creation and use of artifacts, crafts and items of knowledge as well as various forms of social organization (Grupp, 1998). • It is important to distinguish between technological change and scientific advance.

13. Science and Technology • Science includes processes of knowledge creation and diffusion. • Technology on the other hand focuses on the application or usage of the created knowledge. • The research process is of major importance for building and using knowledge for the materialization of innovations.

14. Basic Research • Basic researchor fundamental research refers to experimental or theoretical work geared ‘primarily’ to the acquisition of new knowledge about the basic origin of phenomena and observable events without targeting a particular application of use.

15. Applied Research • Applied researchis biased towards specific and practical purposes or objectives. • It also includes a new knowledge generation process but always in regard of the practical application. The results of applied research are intended to be valid for a limited range of products of processes.

16. Experimental Development • Experimental developmentis systematic work structured on existing knowledge which is directed towards production of new materials, products, equipment or the installation of new processes, systems or services.

17. Academic vs. Industrial Research • The largest part of academic researchis concentrated in basic research, although applied research efforts are also undertaken to a considerable extent in many academic departments • Industrial research and development is mainly concerned with the design and development of artifacts, directed at the more practical application.

18. Academic vs. Industrial Research • Over the years, this distinction has become more and more obsolete. Applied R&D activities are also performed by academic researchers, while industry is involved in basic research to a greater extent. • Furthermore, there is a strong interaction between academic and industrial research, reinforcing each other's capacity to solve complex problems.

19. Definition of Innovation • Innovation is the ability to manage knowledge creatively in response to market-articulated demands and other social needs.

20. Definition of Innovation • Innovation results from complex interactions between research, design, production and marketing that takeplace in a web of interactive learning within and among firms and other knowledge organisations.

21. Definition of Innovation • “New combinations“ of previously not connected ideas, knowledge, technologies or markets.

22. Innovation as a matching engine

23. The Innovation Process Basic Research Discovery Propositional Knowledge

24. The Innovation Process Basic Research Discovery Propositional Knowledge Prescriptive Knowledge (Technology) Invention Applied Research

25. The Innovation Process Basic Research Discovery Propositional Knowledge Prescriptive Knowledge (Technology) Invention Applied Research Design & Development Product & Process Patenting

26. The Innovation Process Basic Research Discovery Propositional Knowledge Prescriptive Knowledge (Technology) Invention Applied Research Design & Development Product & Process Patenting Marketing Usage & Application

27. The Definition • The phrase “system of innovation”is used fordescribing the manyinteractions among manyparticipatinginstitutions, organisations and firms, most of which “formally” operateindependentlyof each other.

28. The Goal of an Innovation System • The goal of an innovation system is to develop, diffuse and utilize innovations.

29. Elements of Innovation System • Policy Bodies • Central policy and financing agencies • Relevant Parliamentary or Governmental Committees • Government agencies for technology diffusion and incubation • Economic development agencies in government • Regulatory Bodies • Ethics bodies, • Registration, and patent offices • Research and Development Institutes • Government Researchinstitutes • Private non-profit Research Organizations • Corporate R&Ds • R&D Performing Firms • Business Enterprises • Large local corporations • SMEs • Business associations

30. Elements of Innovation System • Education and Training institutions • Universities • Technical Colleges • Primary and secondary schools • Non-financial Support Organizations • Public Technology Transfer Agencies • Public Innovation Advisory Agencies • Science and Technology Parks • Technology Incubators • Financial Support Organizations • Commercial Banks • Venture capitalists • Organized Civil Society • Labour unions, especially those dealing with technical change • NGOs delivering technical services Policy advisory bodies interested in technical change • Professional and Academic Societies

31. Types of systems of innovation • Over the nearly two decades since the emergence of the national innovation systems paradigm, a number of other system level analyses have emerged. • The different systems frameworks can be defined as follows: • National innovation systems • Regional innovation systems • Clusters • Sectoral innovation systems • Technological systems of innovation

32. Definition of NIS (Freeman, 1987) • “The network of institutions in the public- and private-sectors whose activities and interactions initiate, import, modify and diffuse new technologies”

33. Definition of NIS (Lundvall, 1992) • “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”

34. Key objectives of an innovation policy: • Building an innovation culture • Enhancing technology diffusion • Promoting networking and clustering • Leveraging research and development • Responding to globalization

35. Functions of NIS (Galli and Teubal 1997) • Hard functions • R&D activities (public) and • the supply of scientific and technical services to third parties (business sector and public administration). • Soft functions: • diffusion of information, knowledge and technology; • Policy making; • design and implementation of institutions concerning patents, laws, standards, etc.; • diffusion of scientific culture, and • professional coordination.

36. Functions of NIS (Rickne, 2000) • to create human capital; • to create and diffuse technological opportunities; • to create and diffuse products; • to incubate in order to provide facilities, equipment, and administrative support, • to facilitate regulation for technologies, materials, and products that may enlarge the market and enhance market access; • to legitimize technology and firms; • to create markets and diffuse market knowledge; • to enhance networking; • to direct technology, market, and partner research; • to facilitate financing; and • to create a labor market that [can be utilized].

37. Functions of NIS (Johnson 2001) • Supply incentives for companies to engage in innovative work • Supply resources (capital + competence) • Guide the direction of search (influence the direction in which actors deploy resources) • Recognize the potential for growth (identifying technological possibilities and economic viability) • Facilitate the exchange of information and knowledge • Stimulate / create markets • Reduce social uncertainty (i.e. uncertainty about how others will act and react) • Counteract the resistance to change that may arise in society when an innovation is introduced (provide legitimacy for the innovation)

38. Silicon Valley • In sixty years, the 50 mile strip from San Francisco-Berkeley to San Jose, California has grown to over 7,000 electronics and software companies with a market value of $ 450 billion. • Its 300,000 top scientists include some one-third born abroad. • A dozen new firms (and dozens of new millionaires through IPOs) are created each week.

39. Hubs of Technological Innovation

40. Analysis of the foci of various systems of innovation frameworks More specific Innovation Clusters Regional Innovation System Place Sectoral Innovation System National Innovation System Technological Systems of Innovation Less specific Less specific More specific System Actors / Agent

41. Definition of Clusters • a concentration of competing, collaborating and interdependent companies and institutions which are connected by a system of market and non-market links. • customers, suppliers, competitors and other supporting institutions such as universities, colleges, research bodies, financial institutions and the utilities

42. Analysis of the foci of various systems of innovation frameworks More specific Innovation Clusters Regional Innovation System Place Sectoral Innovation System National Innovation System Technological Systems of Innovation Less specific Less specific More specific System Actors / Agent

43. Definition of regional innovation system • A set of interacting private and public interests, formal institutions and other organizations that function according to organizational and institutional arrangements and relationships conducive to the generation, use and dissemination of knowledge.

44. Definition of regional innovation system • This set of actors produce pervasive and systemic effects that encourage firms within the region to develop specific forms of capital that is derived from social relations, norms, values and interaction within the community in order to reinforce regional innovative capability and competitiveness.

45. Analysis of the foci of various systems of innovation frameworks More specific Innovation Clusters Regional Innovation System Place Sectoral Innovation System National Innovation System Technological Systems of Innovation Less specific Less specific More specific System Actors / Agent

46. Technology-specific InnovationSystem • This conceptimplies that there are many technology specific innovation systems within a country andthat each technological system is unique in its ability to develop and diffuse newtechnology. (Jacobsson and Johnson 2000)

47. Boundary relations between National, Sectoral, and Technology Specific Innovation Systems National Innovation System

48. Boundary relations between National, Sectoral, and Technology Specific Innovation Systems National Innovation System Sectoral Innovation System Sectoral Innovation System Sectoral Innovation System Sectoral Innovation System Sectoral Innovation System

49. Boundary relations between National, Sectoral, and Technology Specific Innovation Systems National Innovation System Sectoral Innovation System Sectoral Innovation System Technology Specific Innovation System Sectoral Innovation System Technology Specific Innovation System Sectoral Innovation System Sectoral Innovation System

50. Dynamics of technology specific innovation systems • In the case of technology specific innovation systems, the number of actors, networks and relevant institutions is much smaller than in a NSI, which reduces the complexity.