Innovation Policies for the 21st Century Report of a Symposium (2007) / Chapter Skim
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I INTRODUCTION: Innovation Policies for the 21st Century
I INTRODUCTION: Innovation Policies for the 21st Century
Pages 1-38
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From page 3... ...
Responding to these structural changes in the global economy, other advanced economies have already initiated major programs, often with substantial funding, that are designed to attract, nurture, and support innovation and high-technology industries within their national economies. In this new competitive paradigm, the United States cannot assume that its continued preeminence in science and technology is assured.
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Contemporary approaches to innovation policy draw explicitly and implicitly on the idea of an innovation ecosystem, and Section A introduces this concept and the role of intermediating institutions in delivering the fruits of research to the marketplace. Section B highlights new competitive challenges related to the emergence of China and India as major new participants in the global economy.
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Beyond merely focusing on increasing inputs (such as more funds for basic research) on one hand or setting output targets and mandating results on the other, the innovation ecosystem approach examines the complex processes through which innovations emerge through a variety of collaborative activities to become commercially valuable products.4 Many of the speakers at the symposium drew on the idea of an innovation ecosystem.
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can play a key role in this regard by aligning the self-interest of venture capitalists, entrepreneurs and other participants within a complex innovation ecosystem with desired national objectives.7 The idea of an innovation ecosystem builds on the concept of a National Innovation System (NIS) popularized by Richard Nelson.
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Importantly, innovation ecosystems can also be strengthened by developing new institutional mechanisms that create new patterns of interaction, market knowledge, and incentives that motivate new entrepreneurship. Fostering Local Innovation Ecosystems A national innovation ecosystem is made up of a network of local innovation ecosystems.
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As in the United States, critics in Canada often denounce government innovation programs as "corporate welfare," charging that they interfere with the market and are too focused on large companies.a In the case of tax policies, China and Taiwan have created tax free (and even negative tax) environments for some high-technology sectors.
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Some of the new companies may survive and add permanently to the economy, some may have to be replaced with others that are sufficiently similar to stabilize the workforce. It is because regional partnerships enhance mobility and multiply opportunities for workers and for businesses that a critical mass of mutually compatible businesses is needed to stabilize the inevitable effect of startups' moving away.
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innovation ecology. Complementing Marburger's perspective on developing successful local innovation ecosystems, other participants described policy efforts at the national level to develop national innovation potential and competitiveness.
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that continue to keep down labor costs; • A government with a very strong sense of national purpose, which "helps to coordinate things, although it creates some other kinds of problems." China, noted Carl Dahlman, has demonstrated the "importance of the nationstate" not only in implementing development plans and visions but also in providing a stable macroeconomic framework. He underlined what he called the "tremendous pragmatism" exhibited by the Chinese government in setting up needed 12See Carl Dahlman and Jean-Eric Aubert, China and the Knowledge Economy: Seizing the 21st Century, Washington, D.C.: The World Bank, 2001.
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"They are just really revving this up even more," he commented. China Grows a Semiconductor Industry In his presentation, Thomas Howell illustrated how the focus and coordination of China's innovation policies has resulted in the rapid development of a world-class semiconductor industry.
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Howell, Dewey Ballantine, "New Paradigms for fig 1, Intro Partnerships: China Grows a Semiconductor Industry," in Panel III of this volume. or this could go in Landscape view function of China's central government in policy became "mostly hortatory," he added, with the actual benefits and promotional measures implemented largely by the regional governments and local governments in line with the central government's intentions (see Figure 1)
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According to Howell, China's semiconductor industry was valued in 2005 at about $24 billion 19 and is expected to grow to something on the order of $65 billion by 2007. 20 As the bulk of wafer-fab investment moves to China -- and Howell projected that China will boast some 30 new fabrication plants in the ensuing 3 years compared to 6 in the United States -- China is likely to attract more science and engineering graduates from around the world (many of Chinese descent)
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It is also seeking strategic alliances, aided by success in capitalizing on its own diasporas for access to information and markets. Dahlman noted that one of the main lessons to be drawn from the Indian experience is the significance of the long term: The investments in high-level human capital that were now beginning to pay off for India were made as far back as Prime Minister Nehru's time in the 1950s through the mid-1960s.
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These countries face challenges in innovation policy similar to those faced by the United States and, in some cases, share cultural attributes that might make elements of their innovation policies adaptable in the United States. While these models are not necessarily replicable in the American context, their descriptions at the conference did demonstrate the sustained, high-level policy attention that innovation policy receives abroad.
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The latter -- called the Science and Technology Council -- is a key element of the Finnish innovation policy system. This Council is chaired by the prime minister and includes key ministers; the directors-general of the Academy, Tekes, and VTT; as well as representatives of universities, industry, and unions.
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and the Federal Ministry of Research and Education (BMBF) fund a broad variety of technology and innovation programs -- so broad, observed Stephan Kuhlman, as to be difficult to track sometimes.
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A 2002 evaluation showed that nearly three-fourths of participating firms would not have conducted R&D in the absence of this program. The Inno Regio program is designed to strengthen the endogenous innovation potential of weak regions in eastern Germany by setting up sustainable innovation networks.
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Business expense on R&D account for about 55 percent of the country's total, government intramural expenditure on R&D is around 12 percent, with the remainder 33 percent of R&D spending coming from higher education. Given that Canada's innovation system is highly integrated with that of the United States, Canada's innovation programs have focused on building domestic capacity, largely by creating incentives to retain and attract scientific and research talent.
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The purpose of Technology Partnerships Canada is to risk-share industrial research and precompetitive development across a wide spectrum. Designed to address what Nicholson called a "persistent and frustrating" gap in Canadian firms' development of new technology, it covered from 25 to 30 percent of the costs involved in R&D, development of prototypes, and testing.
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A major initiative in this respect, noted by Kahaner and Hideo Shindo of Japan's New Energy and Industrial Technology Development Organization (NEDO) , is the S&T Basic Law of 1995, which provides a framework to improve economic development, social welfare, and environmental sustainability.
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He cited the Nakagawa Report, published in 2004, which identified steps needed to establish and accelerate "the virtuous cycle of demand and innovation in order to bring about Japan's economic recovery and to create its future industrial structure." To this end, the Nakagawa Report draws together what Mr. Shindo described as a "very comprehensive" list of concrete policy priorities, including the identification of promising industrial areas (such as fuel cells and digital consumer electronics)
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These policies have brought about a series of remarkable changes that has seen Taiwan grow from an agrarian economy with per capita GDP of $145 in 1951 to a modern industrial economy with GDP at $13,529 by 2004.32 Notwithstanding this success, Taiwan now faces new challenges in the global economy. Executive Vice President of Taiwan's Industrial Technology Research Institute (IRTI)
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ITRI's role as a hub linking science parks, universities, and companies in Taiwan's north, central, and southern zones helps to link different parts of Taiwan's innovation ecosystem. In 2004, ITRI employed 6,540 people, of whom 14 percent held doctorates.
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For a discussion of the federal government's role, see Irwin Lebow, Information Highways and Byways, New York: Institute of Electrical and Electronics Engineers, 1995. 34See National Research Council, Securing the Future: Regional and National Programs to Support the Semiconductor Industry, Charles W
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However, a focused innovation policy initiated with the Fifth Generation Computer Project and the Super-speed Computer Project, helped Japanese producers to rapidly make significant inroads into the high-performance mainframe computer market. Recognizing that superiority in information technology systems was essential to a qualitative advantage in defense systems, the Defense Advanced Research Projects Agency (DARPA)
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This ambiguity leads to a lack of adequate funding. Similar to the concept of the Valley of Death, this orphaned domain is the focus of Canada's innovation programs.
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laboratories as well. While the United States makes significant investments in its national labo 41For an assessment of ATP, see National Research Council, The Adanced Technology Program: Assessing Outcomes,, op.
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ambivalence about the appropriate role for government in encouraging innovation, as distinct from basic research.b aSee, for example, National Research Council, Funding a Revolution: Government Support for Computing Research, Washington, D.C.: National Academy Press, 1999, pp. 5-14 and passim.
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Then, in 1995, the National Technology Transfer Act guaranteed to industry the ability to negotiate for rights to CRADA inventions and increased the royalty distribution that were placed on laboratory inventions, thereby increasing the motivation to invent. ratories, the record of successful technology transfer to commercial applications has been relatively limited, according to Pace VanDevender of Sandia National Laboratories.42 This modest outcome comes despite a long series of legislative experiments that have repeatedly sought to create the incentives needed to spur technology transfer from the national laboratories.
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SOURCE: Presentation by J Pace VanDevender, Sandia National Laboratories, "Sandia National Laboratories: DoE Labs and Industry Outreach," in this volume.
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Pace VanDevender, Sandia National Laboratories, "Sandia National Laboratories: DoE Labs and Industry Outreach," in Panel IV of this volume. Sandia Park by the spring of 2005 housed 19 organizations with 1,098 employees that occupied almost 500,000 square feet.
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Perhaps what is most striking is the range of mechanisms, the similarity of goals, and the very substantial resources devoted to building the infrastructure and technological capabilities -- not for national security -- but for national competitiveness in the global economy. With some exceptions (e.g., small business award programs, such as SBIR and ATP)
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The legal regime is further reinforced by positive societal attitudes toward business success. This combination of mutually reinforcing attitudes and laws represents a unique competitive advantage for the United States, one that sets the U.S.
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The common challenge for most participants in the global economy is the need to capitalize on their intellectual assets, converting government funded research into the innovative technologies and processes that generate improved welfare, create international competitiveness, and create wealth for their citizens. It is, perhaps, exceptional that countries as diverse as China, India, Taiwan, Japan, Germany, France, Finland, Canada, and the United States are all devoting substantial policy attention to the transition of research into products and processes 47See, for example, the presentations by Stephan Kuhlman and Finland's Heikki Kotilainen in Panel II of this volume.
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innovation ecosystem. As described in the conference proceedings that are summarized in the next chapter, the many foreign programs presented at this conference provide graphic evidence of the scope and scale of national efforts to enhance their national prospects in the global economy.
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