KEF VII: Technology Absorption by Innovative SMEs Concluding Remarks

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KEF VII Technology Absorption by Innovative
SMEs Concluding Remarks

• F. Montes-Negret
• Director, Private and Financial Sector
• Europe and Central Asia, The World Bank
• June 19, 2008, Ancona, Italy

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Agenda

• Globalization Technology Absorption
• Technology Absorption Channels
• Clusters Global Supply Chains
• Competitiveness Human Capital
• Responsive HEIs Industry
• Regional Innovation
• Partnerships
• Quality Standards
• Start-Ups Spin-Offs

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Technology diffusion in the developing world

• Globalization has been a main driver of
  technological progress
• The technology gap between rich and poor
  countries has narrowed -- but remains large
• Progress in developing countries reflects the
  absorption of pre-existing technologies not
  at-the-frontier inventions
• Technology diffusion across countries has picked
  up, but diffusion within countries remains slow
  and penetration rates uneven
• Persistent weakness in technological absorptive
  capacity may constrain further technological
  progress.

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Key features of a pro-technology policy stance

• No detailed roadmap for promoting technological
  progress, but certain policy directions are
  indicated
• Maintain openness to trade, foreign direct
  investment and participation of diaspora
• Further improve the investment climate so as to
  allow innovative firms to grow and flourish
• Improve basic infrastructure (roads, electricity,
  telephony)
• Raise the quality and quantity of education
  throughout economy not just major centers
• Emphasize technology diffusion by reinforcing
  dissemination systems and the market-orientation
  of RD programs

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Technology progress is mainly about absorbing and
adopting technologies developed elsewhere
Exposure to foreign technology

Capacity to absorb

Technological progress
Technology in the developing country
In-country diffusion

Source World Bank, Global Economic Prospects
(2008)
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Technological Flows

• Unbundling of Productive Activities
• Technology transfer strongly affected by North/
  South firm interaction
• Unbundling of production has created
  extraordinary new opportunities for technology
  diffusion
• Technological flows no longer unilateral
• Many countries or part of countries still
  excluded.

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Policies for K Absorption

• Absorption depends on Local RD
• Chinas Sea Turtles Expatriates Role
• ECA proximity to EU
• ? return migration
• ? outsourcing
• ? absorption
• RD reform ?RD collaboration
• RD-driven FDI effects
• Sequencing RD? deal flow? seed? VC

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Patents Co-Invention

• Patents provide rich information on technological
  development, even in follower countries, and
  (some) patents can even provide direct measures
  of technology absorption
• Patents can be quite useful in filling in the
  gaps in our knowledge surrounding technological
  development and technology absorption in ECA and
  other developing regions
• A large fraction of ECA patents are made up of
  multinational inventor teams international
  co-invention
• Much of it takes place under the auspices of
  Western multinationals
• Are ECA inventors increasingly participating in
  an international division of RD labor?

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Patenting Trends

• The growth of ECA patenting is decelerating, even
  as Chinese and Indian patenting accelerates
• Indigenous ECA patenting continues to lag in
  quality, quantity, and connectedness to the
  global state of the art
• Multinational RD in ECA raises the quality and
  quantity of ECA patenting
• ECA inventors are participating in international
  coinvention networks, a phenomenon worthy of
  further study
• Increasing (but few) international patents
• Relative importance of Eastern Central Asia for
  EU core decreasing while role of Asia for EU
  core countries is increasing.

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Clusters Collective Efficiency
External economies
Joint actions
Collective Efficiency
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Italian Smallness Trap Lessons for emerging
countries?

• in particular, for countries emerging from
  transition private SMEs are the necessary
  antidote to the old model of large and
  inefficient state-owned firms
• As soon as the private sector has consolidated,
  and the economy has reached a middle-income level
  of development, how to stimulate the endogenous
  dimensional growth of firms should become a
  policy priority
• Otherwise, as the recent Italian experience
  shows, an economy about to approach an advanced
  development stage may enter a smallness trap

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Short Medium term challenges for SME policy in
Russia

• Differences in enabling environment across
  Russian regions and clusters is key challenge for
  national SME policy
• National SME policy should be more focused on
  stimulating and supporting regional SME policy
• Regional and local governments will play more
  important role in SME development
• Regional SME policy (short and medium term) can
  be focused on some important issues
  infrastructure (i.e. industrial/suppliers park),
  availability of financial resources, regional
  innovation infrastructure and administrative
  barriers

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KraussMaffei Message
HR Development should not be delegatedIt has to
be made a priority by top management
Improve top-down communication within organization
Listen to your own people and have a look at
things from their perspective
Appraisal interviews are a chance to give
orientation to both of employees and organization
Improve customer orientation of staff
Benchmark on all hierarchy levels (plant visits,
common projects like quality, service, cost
awareness, etc.) with other companies of the same
size and with a similar structure it is not
mandatory to be in the same business
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Integrated Talent Management
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Innovation-led Growth Four Pathways (MIT)
Indigenous creation of new industry
Exogeneous creation of new industry
Upgrading existing mature industry
Diversification of existing industry into new

• Use the core technologies of an existing and
  declining industry

- Create entirely new industry
- Enhance products, services or production
technologies

• Import new industry to the region

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From Core Values to Business Competitiveness
How we develop our human capital
Business Competitiveness
What we want to be
People Development
What we need to know to do
Knowledge Enhancement
Core Values
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Le Marche Specific and Perhaps Exclusive Features!

• The cluster is mainly based on a cultural
  approach
• - creativity and entrepreneurship are the ground
  skills for the spin-off
• - imitation and emulation effects push newcomers
• - competition cooperation allow for the
  distribution of production phases among many
  firms
• - traditional and non hi-tech industries involve
  low entrance barriers
• - high specialization in each production step
  needs a low plant cost

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Le Marche Public-Private Partnership!

• The cluster is an endogenous and self-governing
  phenomenon the public role is rarely a decisive
  start-up factor
• Nevertheless, the policy maker may offer strong
  support to strengthen the external economies (the
  core of a cluster!)
• External economies change continuously
  establishment areas, basic services, worker
  availability and suitable education, material and
  immaterial infrastructures, quality and
  environmental certification
• As the cluster grows, the governance becomes more
  and more relevant in the Marche Region the
  Technological Center System as well as the
  District Council are composed of local
  stakeholders (such as representatives of Public
  Boards and social and economic actors)

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Institutions Infrastructure for Global
Quality Standards

• Metrology, standards, testing and certification
• help diffuse technology to SMEs
• provide the technical infrastructure for
  innovation
• increase trust between SMEs and their buyers
• Quality, testing and certification service
  platforms can act as important facilitators of
  SME innovation in clusters
• Public-private partnerships can play an important
  role in helping clusters define the types of
  services that can help foster regional innovation
• BUT metrology, standards, testing and
  certification CAN ALSO HAMPER technology
  absorption and innovation when imposed on a
  top-down basis by the government
• by placing barriers to trade in technology
• by limiting freedom to innovate

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Business Incubators
Business incubators are a leading instrument used
by European governments to facilitate technology
transfer from public research organizations Commer
cial risks pose a greater problem than technical
risks when taking RD results to market, not
least because spin-offs are often founded by
scientists with technical capacities but without
business skills
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Connecting the dots

• Complexity gt No single path or model
• Key to facilitate enterprise entry and ,
  critically, their growth
• Multiple tools Incubators, spin-offs,
• Innovation and Absorption
• COMPLIMENTARY NOT EXCLUSIVE PATHS
• All industries must innovate in products and
  processes
• BRANDING DESIGN increasingly differentiating
  element
• Core of Innovation and Sustained Enterprise
  Growth
• CONTINUOUS ADAPTIVE INVESTMENT IN TALENT
• MODERN HEIs embody entrepreneurial and
  technological leadership to serve Local SMEs
  (INCENTIVES) rooted in 3Ts
• TALENT, TECHNOLOGY, TERRITORY