Enhancing the role of KISA in Innovation Systems Dr. Jonathan Potter Senior Economist OECD Centre for SMEs, Entrepreneurship & Local Development Second Research Seminar KIBS & knowledge flows in a globalised economy NESTA, 1 Plough Place, London 28 March 2011

Presentation Structure 1.Outline of OECD KISA work 2.KISA and KIBS: nature and trends 3.The role of KISA in innovation systems 4.Policy suggestions

OECD KISA work Part One:

1.1 Exploratory KISA study Most firms make use of KISAs in their daily operations, producing them internally or sourcing them externally How do KISAs contribute to acquisition and growth of innovation capabilities?

1.2 What are KISAs? R&D; information and communication services; human resource management; tax services; accounting; marketing etc Internal KISAFunctional experts (financing, operations, logistics, marketing, legal), researchers, managers, directors, R&D departments, innovation units, venturing units External KISAConsultants, KIBS firms, RTOs, trade bodies, various types of networks, professional organisations, government agencies

1.3 Study method 9 country studies 4 broad industry groups 20 case studies Industry mapping 1000 survey respondents 230 interviews What kinds of KISAs occur? How do they affect innovation?

1.4 Other work touching on KISA OECD Innovation Strategy –Non-technological innovation –Open innovation –Role of SMEs and entrepreneurship Local SME and Entrepreneurship Reviews –Policy assessments in case study regions –Focus on networks and knowledge flows in innovation Training in SMEs –Use of KISAs as an informal training mechanism

KISA and KIBS: nature and trends Part Two:

2.1 Scale of KIBS Note: As a % of total industry, construction and market services excl. financial intermediation. Figures for the US are for 2006 and are nymber of employees. Source: OECD Structural and Business Demographic Statistics Database

2.2 Growth of KIBS Note: For the US, Annual growth of the number of employees Source: OECD Structural and Business Demographic Statistics Database

2.3 KISA clusters – USA Source: OECD, based on ORBIS database

2.4 KISA-intensive regions Source: OECD, Regions at a Glance, 2005 data

2.5 SMEs & KIBS (UK) Source: OECD Structural and Business Demographic Statistics Database

KIBS role in innovation Part Three:

3.1 Types of KISA contribution 1.Sources of innovation Initiating and developing innovation activities in client organisations 2.Facilitators of innovation Supporting organisations in the innovation process 3.Carriers of innovation Transferring existing knowledge among or within organisations, industries and networks

3.3 KISA and skills upgrading Note: BE = 38, NZ = 74, PO = 137, TU = 49, UK = 50, Total = 348 Source: OECD LEED (2010), Leveraging Training & Skills Development in SMEs: Preliminary Cross-Country Analysis of the TSME Survey

Policy suggestions Part Four:

4.1 KISA absorption Effective human resource management –Employ experts; form multi-disciplinary research teams; use personal connections with industry and other experts Appropriate organisational structures –Dedicated business units that scan the environment and develop new expertise; acquisition of firms that can bring in new knowledge and innovative thinking; joint ventures that institutionalise co-operation

4.2 KISA absorption (contd) Effective networks and linkages –Participate in networks; engage in close co-operation with suppliers and customers in new solutions development; joint projects with research Use of market-based transactions –Buy integrated product/service bundles that bring external KISA within the firm; outsource to integrate former internal KISA with external expertise; purchase from service providers and work with them

4.3 Policy for external KISA Supply of KISA –Promote university consulting –Public sector KISA should not substitute for private sector KISA –Professionalise KISA suppliers –Ensure sufficient supply of financing for growth- oriented KISA firms Networking –Focus public innovation programmes on ‘softer’ and ‘downstream ‘ innovation –Proactive brokering –Building skills and appropriate structures in firms

4.4 Policy for external KISA Demand for KISA –Develop awareness of KISA –Certify services –Publicly-funded demonstration projects –Tax incentives for use of KISA in innovation –Public procurement favouring use of external KISA –KISA vouchers for SMEs

4.5 Conclusion Overall Innovation policy should be more responsive to non-technological aspects of innovation, and recognise the role of KISA “Further research will be necessary to more fully explore the most effective role of public policy in stimulating supply and demand of KISA”