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The National Innovation System Outline Introduction Defining the national innovation system Central role of R&D The tripod – Government – Business – Universities.

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Presentation on theme: "The National Innovation System Outline Introduction Defining the national innovation system Central role of R&D The tripod – Government – Business – Universities."— Presentation transcript:

1 The National Innovation System Outline Introduction Defining the national innovation system Central role of R&D The tripod – Government – Business – Universities NIS in emerging markets

2 Introduction This chapter sets out the complex interrelations concerning innovation in an economy. – Discuss ‘science-base’ and ‘knowledge economy’ – Business does not stand alone, government and universities are integral part of innovation system – Research and development (R&D) is investment spent both to develop new ideas and science and to transform them into commercial innovations – Chapter illustrates these ideas with data from OECD and, at end, with emerging market examples

3 Definitions National system of innovation – “The national innovation system essentially consists of three sectors: industry, universities, and the government, with each sector interacting with the others, while at the same time playing its own role.” Goto (2000, p. 104) – Also called Triple Helix model, there are a number of ways to discuss/define basic idea but note: national innovation system is a complex conglomerate of interacting independent parties

4 Roles of the three players Universities – undertake basic science and technology research – educate scientists and technologists needed by business and government Governments – design IPR system for business and universities – commission science research e.g. for defense – finance universities, subsidise business R&D Business – conduct R&D to develop commercial products – launch innovative products – start up new firms to exploit new science

5 The central role of R&D Lecture 3 has begun the discussion of R&D by giving the definitions and showing some aggregate measures Next three tables illustrate breakdowns: Who funds R&D? Where is it conducted? What are main subjects for research? Note variations across countries in these tables. Other sources of data include: National statistical offices OECD

6 Table 4.1 Funding of R&D by government and business CountryR&D/GDP in 2004 R&D/GDP funded by GOV in 2005 GOV R&D / Total R&D x 100% % of R&D funded by BES in 2003 EU251.860.7439.854.3 EU151.920.7639.654.6 Germany2.490.7630.567.1 France2.160.9443.550.8 UK1.790.7340.843.9 Japan3.200.7122.274.5 USA2.661.0639.861.4

7 Table 4.2 The conduct of R&D by business, government and universities in 2003 CountryR&D/GDP conducted by BES R&D/GDP conducted by GOV R&D/GDP conducted by HES Sum of columns 1 to 3 Total R&D/GDP EU251.220.250.411.881.90 EU151.260.250.421.931.95 Germany1.760.340.432.532.52 France1.370.360.422.152.18 UK1.240.180.401.821.88 Japan2.400.300.443.143.20 USA1.860.330.372.562.67

8 Table 4.3 Percentage allocation of government R&D support by objective in 2005 CountryLandHealthEnergyIndustryUniversityDefenceAll Other EU259.67.32.810.932.013.624.0 EU159.37.32.710.932.413.823.8 Germany8.94.42.912.440.35.826.0 France6. UK8.514.70.41.721.731.022.0 Japan10.33.917. USA4.522.81.10.4..56.614.6

9 The Government-University Axis Knowledge is a public good (non-rival), hence market mechanism alone cannot generate optimal amount – Government funding of university research, and government research labs, are main solutions in modern economies – Discussion of historical origins (including your own university/college role in science) – Funding mechanisms – is there an optimal one?

10 Changing provision of basic science for knowledge economy Historical system: Provision of basic science as a public good Discoveries were placed in the public domain without any private ownership Motivation of scientists was respect of scientific community or ‘peer review’ Use of science base open to all types of business Recent changes: Government finance for research is conditional on the research having more immediate application in industrial and commercial products

11 The University-Business Axis University-business links - many dimensions: – IPRs held by university – Research joint ventures – Spin-outs/start-ups – Personnel pooling Growth of university IPRs – US Bayh-Dole Act 1980 stimulated change – Before - government owned any patents on federally funded science and then issued non-exclusive licences – After – university/scientists own IPRs and can licence exclusively to key firms – Often achieved via technology transfer offices (TTOs) – Many EU countries have followed these changes

12 University-Business Linkages Collaboration in Research Joint, contract, and commissioned research, Consultancy by academics Spin-outs, Start-ups, Science Parks Formation of spin-outs and joint ventures Formation of university incubators Growth of science parks near to university Personnel Linkages Formal and informal social and professional networks Continuing professional development and education, including public university lectures and workshops Academic-scientist exchanges with firms Recruitment of students from universities by firms

13 The Government-Business Axis Key areas of innovation policy: IPRs - the enforcement of IPRs can be influenced by national policy, as is legislation to some extent Tax policy - corporate tax policy can affect innovation in various ways; key areas include R&D tax concessions, rules surrounding IP, and venture capital Competition policy - the stance of competition policy matters, especially when decisions involve innovation (e.g. a firm has a dominant market position but also leads the industry in terms of innovation)

14 Further key areas of innovation policy: Government-business targeted funding – can be of specific research areas, technology development and small business Standard setting - government is involved in setting various standards for measurement, performance, safety, testing and interoperability Procurement policies - as a large purchaser of goods and services, the government can influence business activity (e.g. its decisions about purchasing computers)

15 National Innovation Systems in Emerging Markets South Korea and Taiwan: - 50 years ago both were poor countries - Their governments promoted research and technology setting up important university research institutes - Firms were encouraged to do R&D - Initial approach was reverse engineering and technology transfer from the rich world - Later graduated to developing world class innovations China and India: - Began with large populations but small % highly educated - China has encouraged FDI and technology transfer - India less open, but in 1990s expanded higher education - Indian firms have focused on pharmaceuticals and software

16 Patenting, national innovation systems and performance Emerging countries have taken different routes for acquiring and developing technologies Catching up through technology transfer precedes the stage of becoming innovators Big differences in US patent applications by emerging economies in last 20 years (next slide) Korea and Taiwan show rapid growth since 1990 China is also beginning to emerge as an innovating country after 2000 India slower growth in IPRs due to narrow range Brazil, Mexico and Russia very low figures

17 US patents granted to firms from emerging economies Country1987199019952000200520062007 BRAZIL35457011398148118 CHINA2348631625659701235 INDIA122338131403506578 KOREA10529012403472459165097264 MEXICO5434451009588 RUSSIA0099185154176193 TAIWAN41186120875806599379207491

18 Questions 1.Identify the three main partners within the NIS. Should they play complementary or competing roles in generating innovation? 2.What are the main ways in which universities and private businesses interact? 3.Is it a good idea for university science departments or individual academics to patent their scientific research findings? 4.If universities do patent, should they offer licenses to one or more firms? How much should the licences cost? Should government regulate these activities? 5.In public/private partnerships, is the presence of government a 'dead hand' or a necessary catalyst for innovation? 6.Discuss the role of government in supporting the NIS in emerging economies. 7.Do national statistics on the number of patents tell us anything important?

19 References Freeman, C. (1995), 'The National System of Innovation in Historical Perspective', Cambridge Journal of Economics, 19: 5-24. Goto, A. (2000), ‘Japan’s National Innovation System: Current Status and Problems’, Oxford Review of Economic Policy, 16(2), 103-113. Lundvall, B. (1992), National Systems of Innovation, London, Pinter. Siegel, D., Veugelers, R. and Wright, M. (2007), 'Technology transfer offices and commercialization of university intellectual property: performance and policy implications', Oxford Review of Economic Policy, 23(4): 640-660. Thursby, J. and M. Thursby (2007), 'University licensing', Oxford Review of Economic Policy 23(4), 620-639.

20 Further References National Innovation Systems in Emerging Markets: Hobday, M. (1995). Innovation in East Asia. Aldershot, UK, Edward Elgar. Kim, D. S. and D. K. Kim (2005), 'The Evolutionary Responses of Korean Government Research Institutes in a Changing National Innovation System', Science, Technology and Society 10, 31-55. Kumar, N. (2003). "Intellectual Property Rights, Technology and Economic Development Experiences of Asian Countries." Economic and Political Weekly January 18: 209-226. Lundin, N. and S. Serger (2007), 'Globalization of R&D and China', Research Institute of Industrial Economics, Sweden, IFN Working Paper 710.

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