Innovation – Key to Competitiveness BINASIA-Iran National Workshop Tehran, Iran November 2005 Asian and Pacific Centre for Transfer of Technology (APCTT)

Changing Global Scenario New realities the companies should consider to be competitive: Shortening life cycle of products Globalisation of world economies Globalisation of technologies Shift of emphasis from manufacturing to knowledge-based economies Postulate on new technology: If you understand it, it is obsolete

Globalising Knowledge-based Economies: Realities Idea & Concept Product Design & Prototype Market

Signals For Change The Innovation Imperative New or improved products or services The Organization New or improved processes Maintained or improved competitiveness

Technology Acquisiton Top success factors in global competitiveness Skilled Labour Quality assurance Strategic alliances New sources of capital Key R&D talent Government finan. Assist. Increased exports Financial management skills Mang. company strategey Develop. of new technology

Technology exchange -between companies Technology exploitation -from R&D to industry Technology Acquisition

Technology Acquisition Chain The chain is no stronger than its weakest link English proverb Marketing: Networks Agents Retailers Financing: Loans Venture Capital Grants Negotiation: Technical Financial Commercial Studies: Technology Feasibility Market Search: Information Opportunities Partners

OECD estimates that between 1970 and 1995 more than half the total growth in output of the developed world resulted from innovation, and the proportion is increasing as the economy becomes ever more knowledge- intensive New Reality - Knowledge-based Economy

Critical mass of commercially oriented research expertise Industrial technology users Investors and consultants, creating favourable conditions for the birth of fast-growing, high-tech companies New talents & new money Sustainable Innovation Environment

Every organization-not just business-needs one core competence: innovation Peter F. Drucker New products & services Better ways for reaching customers More efficient production techniques Quality improvements Novel cleaner production methods Improved management systems New approaches to gathering and dissemination of information Better internal climate and services New forms of employee & stakeholder participation Innovation - conversion of new knowledge into new products and services Sustainable Innovation - Key to Success. And Survival.

Source: EU Community Innovation Survey (CIS), 1999 The lifeblood of any successful innovation system is communication and interaction Information Sources Important for Innovation

Per cent of innovating companies with abandoned or delayed projects Factors Preventing Introduction of Innovation at SMEs (EU Survey, 1998)

Activities to Promote Innovation among SMEs

Innovation is not a one-off event, but a continuous response to changing circumstances. Ideally, it does not just solve a problem but creates new capacity, opening up opportunities for further innovation In the Information Technology industry, the recommended share of employees in the company ownership is around 30% Continuous Innovation: Motivation of all Employees Becomes Critical

Innovation Index Source: The Global Competitiveness Report 2000, World Economic Forum R&D spending by government & private sector Quality of R&D institutions and S&T education Cooperation between R&D sector and industry Pioneering of own products & processes Incentives for innovation Access to venture capital Ease of starting businesses IPR protection Components

Technology Index Source: The Global Competitiveness Report 2000, World Economic Forum Technological leadership on the global market Aggressiveness in absorbing new technology Components

Critical Issues for Entrepreneurial Activity: GEM 2000 Survey Source: GEM Report 2000 Government Policy Education & Training Cultural, Social Norms Finance Australia 312 Germany 132 India 123 Japan 312 Singapore 321 S.Korea 132 USA Most often mentioned by experts 3 -Third 2 -Second

Critical Tasks in the Era of Globalisation, Innovation and Knowledge-driven Economies Critical Technological Development Tasks Areas of Critical Intervention To promote (cross-border) technological cooperation Joint R&D Joint commercialisation Sub-contracting To promote growth of technology-led enterprises Technology business incubators Innovation support systems Regional associations To develop effective risk financing mechanisms Business angels Venture capital High-tech stock markets To develop vibrant communities of stakeholders Cross-border Web-aided communities Local communities & networks

Critical Tasks in the Era of Globalisation, Innovation and Knowledge-driven Economies Critical Technological Development Tasks Areas of Critical Intervention To promote cross-border technological cooperation Joint R&D Joint commercialisation Sub-contracting To promote growth of technology-led enterprises Technology business incubators Innovation support systems Regional associations To develop effective risk financing mechanisms Business angels Venture capital High-tech stock markets To develop vibrant communities of stakeholders Cross-border Web-aided communities Local communities & networks

Cross-border Technological Cooperation: Building on Mutual Strength - Examples Russia ! Advanced R&D Republic of Korea ! R&D Commercialisation India ! Advanced Biotechnology Japan ! R&D Commercialisation ASEAN Countries ASEAN Industrial Projects ASEAN Industrial Complementation Programme ASEAN Industrial Joint Venture Programme

Critical Tasks in the Era of Globalisation, Innovation and Knowledge-driven Economies Critical Technological Development Tasks Areas of Critical Intervention To promote cross-border technological cooperation Joint R&D Joint commercialisation Sub-contracting To promote growth of technology-led enterprises Technology business incubators Innovation support systems Regional associations To develop effective risk financing mechanisms Business angels Venture capital High-tech stock markets To develop vibrant communities of stakeholders Cross-border Web-aided communities Local communities & networks

Technology Business Incubation Technology incubators nurture hi-tech start-ups and present a technology-oriented variant of business incubators hands-on management assistance access to financing business and technical support services shared office space, access to equipment Incubators provide: Business incubation is a dynamic process of business enterprise development. Incubators nurture young firms, helping them to survive and grow during the startup period when they are most vulnerable.

Specific Features of Technology Business Incubators Generally linked to universities, research centres Links Established within a technology park or close to other sources of technological support Location May require specific equipment (computing, testing, rapid prototyping, etc.) and other technical expertise Services Management & mentoring staff require specific expertise in devt of technology-led businesses Staff

Critical Tasks in the Era of Globalisation, Innovation and Knowledge-driven Economies Critical Technological Development Tasks Areas of Critical Intervention To promote cross-border technological cooperation Joint R&D Joint commercialisation Sub-contracting To promote growth of technology-led enterprises Technology business incubators Innovation support systems Regional associations To develop effective risk financing mechanisms Business angels Venture capital High-tech stock markets To develop vibrant communities of stakeholders Cross-border Web-aided communities Local communities & networks

Innovation Financing Chain Venture capital cannot finance innovation on its own. Dynamic innovation demands an unbroken financing chain, from seed capital to stock market. The financing chain is no stronger than its weakest link. Idea Pre-seed Own funds Family Friends Start-up Seed Devt funds Business Angels Fortification Hi-tech stock markets Expansion Growth Venture Capital VC companies T Y P E O F F I N A N C E R E Q U I R E D P R I N C I P A L S O U R C E S O F F I N A N C E

Growing Role of Risk Financing Mechanism for High-tech Start-ups Speed of technological change Role of debt and risk financing Private investments in emerging and new businesses dwarf the more formal venture capital outlays. In US alone total private investments in entrepreneurial companies in 1999 was more than US$ 63 billion – far more than the US$ 46 billion the professional venture capital industry invested during the same period in start-ups and growing firms.

Average Success of VC Financing (US pattern) Company growth Return on investment

New Technology Financing - Success Rates 6 in 1000 business plans get funded on average The No 1 reason a start-ups valuation is cut due to incomplete executive teams 10% of start up in a given venture capital portfolio will succeed 6 out of 1,000,000 technology ideas will result in IPO Source: Artemis Ventures

Critical Tasks in the Era of Globalisation, Innovation and Knowledge-driven Economies Critical Technological Development Tasks Areas of Critical Intervention To promote cross-border technological cooperation Joint R&D Joint commercialisation Sub-contracting To promote growth of technology-led enterprises Technology business incubators Innovation support systems Regional associations To develop effective risk financing mechanisms Business angels Venture capital High-tech stock markets To develop vibrant communities of stakeholders Cross-border Web-aided communities Local communities & networks

Services Available to Web Communities of Technology Transfer Stakeholders Project preparation and management Building of the project team File sharing Pooling of resources Access to external services Discussion room Chat room Administration & reporting tools Project Development: Access to relevant online news, databanks and support services Sharing of knowledge and ideas Posting of business proposals Matching of prospective partners Expert forums Chat rooms Personal/corporate sites User-customized work space Stakeholder Networking:

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