Policy concepts and instruments for support of business innovation

1
Policy concepts and instruments for support of
business innovation

• Keith Smith
• Australian Innovation Research Centre
• University of Tasmania

2
Developments in innovation policy the changing
global context

• Strong differences between the major economies
  (especially between USA and EU)
• New global growth dynamic Big growth in output,
  RD and skilled personnel in China, India,
  Russia, Brazil, Turkey, Mexico, India etc
• Entry of smaller countries in advanced
  technologies - for example Finland, Sweden,
  Canada in mobile
• New patterns of RD globalisation and skilled
  mobility - global sourcing is replacing
  trade-driven RD

3
Objectives of innovation policy

• To enhance problem-solving capabilities in
  society, in such areas as health, education
• To provide the support conditions for populations
  of innovating firms, capable of survival and
  growth

4
New directions in innovation policy

• Need to base policies on the real characteristics
  of innovation processes
• New emphasis on innovation system policies, and
  on sectoral approaches
• Need to take account of changing patterns of
  demand as world economy grows (for example food,
  resources)
• New attention to sectors (especially low-tech)
  and to resource-based sectors

5
What do we know about innovation processes?

• Innovation research over the past two decades has
  shown
• Innovation is generally not science driven
• Innovation is pervasive across sectors - it is
  not confined to high tech environments
• Innovation differs sharply across sectors (in
  terms of inputs, organisation and actors,
  knowledge bases, risk profiles)
• Innovation capabilities are cumulative over time
• Innovation outcomes are highly uncertain
• Innovation is collective - it relies on the
  innovation environment

6
Innovation environments the innovation system

• Historically developed patterns of
• Specialisation
• Institutions
• Knowledge creating organizations
• Risk management agencies
• Skills and education
• - that support and structure innovation

7
System levels

• Systems can be thought of at different levels
• Technological
• Sectoral
• National

8
System functioning - what does a well-functioning
innovation system do?

• Identify opportunities
• Create capabilities, make experiments
• Create and diffuse knowledge
• Manage risk (risk reduction, risk sharing, risk
  shifting)
• Mobilise resources
• Create positive externalities

9
Key system policy instruments

• Organisations for developing strategic visions
  and creating opportunity
• Education and skills
• Physical and knowledge infrastructures
• RD capability
• Risk management - finance
• These elements of system policy are not affected
  by globalisation rules

10
At national level in Europe

• New organizing concepts (especially systems
  approaches)
• New agencies for implementation (with system
  focus)
• Wider rationales (bounded vision, limits to firm
  capabilities, management of uncertainty,
  institutional and infrastructure frameworks,
  system failures)
• Broader set of objectives (innovation/RD policy
  as broad instrument for other objectives)
• Wider array of instruments (reflecting innovation
  complexity)
• Innovation perspective in other policy arenas
  (such as competition, regulation)
• Complex links to EU (transnational issues)

11
Innovation policy measures

• Financing (mobilisation of private capital,
  investment in VC funds, public loan operations)
• Taxation (fiscal measures beyond RD wealth,
  options, social security issues etc)
• Strategic Vision of RD (forecasting exercises)
• Strengthening Company Research (university-industr
  y collaboration, near-market development schemes)
• Start-up of technology-based companies Education
  Training (specifically related to innovation
  skills acqisition, distance learning, lifelong
  learning etc)
• Mobility Students/Researcher/Teachers
  (inter-sectoral mobility programs, having large
  efects in some countrries)
• Public Authorities (infrastructures, public
  procurement, monitoring and analysis, statistics
  and indicators, innovation in the public sector,
  policy capabilities)
• Promotion of clustering and co-operation for
  innovation (regional initiatives, cluster-wide
  services)
• Competition impacts on innovation, measures to
  improve tech transfer

12
Sector policies and agencies in Australia

• Co-operative Research Centres - about 50, joint
  funded between industry and government
• Rural Research and Development Corporations
  (about 10, in wine, dairy products, etc)
• Action Agendas for sectoral strategies
• Food innovation grants
• University links with CRCs
• Industry development associations - such as
  Australian Research Institute for Minerals (ARIMA)

13
Wine in Australia

• Organisations
• Strategic vision - Wine 2025 (made by Wine
  Makers and Grape Growers Federations)
• Infrastructure CSIRO (Commonwealth Scientific
  and Industrial Research Organisation)
• Grape and Wine Development Corporation (Joint RD
  operation)
• Science-based wine education - training in 12
  universities
• Infrastructure, RD and education all supported
  by Federal government

14
Wine achievements in Australia

• Major Innovations
• Mechanical harvesting and pruning
• New root stocks and viticulture methods
• New varieties
• Economic outcomes
• 12 compound annual growth rates in output and
  trade since 1986
• 3 share of world market
• Exports US2 billion
• 2000 producers

15
Wine in Australia - the big problem

• Industry became dominated by 4 firms - BRL Hardy,
  Southcorp, Orlando Wyndham, and Mildara Blass
• In 2003 they had 80 of Australian market and
  exports
• None of these firms exists today - owned by
  Fosters Group (Australian), Constellation Brnads
  (USA), Pernod Ricard (France)
• Why? None were able to manage the scale and risks
  of global distribution

16
Conclusions

• Global growth is opening up new areas for
  innovative products
• These are not necessarily high tech - they
  include food products, furniture, clothing etc
• They require sector-specific development
  strategies, based on thorough knowledge of how
  innovation occurs
• Sector policy instruments can be controlled by
  national governments