UNU-MERIT: How firms innovate: R&D, non-R&D, and technology adoption

You may be interested in the following paper from UNU-MERIT by C. Huang, A. Arundel & H. Hollanders

The official abstract is below.

Non-R&D innovation is a common economic phenomenon, though R&D has been the central focus of policy making and scholarly research in the field of innovation. An analysis of the third European Community Innovation
Survey (CIS-3) results for 15 countries finds that almost half of innovative European firms did not perform R&D in-house. Firms with weak in-house innovative capabilities and which source information from suppliers and competitors tend to innovate through non-R&D activities.
In contrast, firms that engage in product innovation, find clients, universities and research institutions an important information source for innovation, or apply for patents or use other appropriation methods are more likely to perform R&D. However, non-R&D performers do not form a consistent block, with several notable differences between firms that use three different methods of innovating without performing R&D. Many of these determinants also influence the share of total innovation expenditures that are spent on non-R&D innovation activities. Furthermore, an analysis of the determinants of the share of each firm’s total innovation expenditures for non-R&D activities shows that the
factors that influence how innovation expenditures are distributed is generally consistent across sectors and European countries.

What I find interesting is that these empirical findings are very similar to what I have found in my interviews with South African firms. Many firms do a lot of innovation without spending any money on R & D. A large number of firms use specialised product developers (or freelance experts) to do research on their behalf. Or they depend on universities or technology stations for research. Amazingly, the majority of the firms doing product development (as their area of specialisation) are small firms.

I wish we had this kind of data in Africa…..


The effect of the financial crisis on Africa

The 2010 African Economic Outlook was launched on the 24th of May 2010.  The report states that 80% of economies in Africa still showed economic growth in 2009, compared to 10% of the OECD countries. To see the statistics, head over to their website. You can even manipulate (or interact) with the data for your own research. The best thing is that access to this data is free!

While browsing their site I found an interesting page on the topic of “China in Africa: Debunking myths and debating truths“. The influence of China in Africa is now even a topic at family barbecues, so perhaps this is a good place to gain some new perspectives.

Where does innovation come from? – part 1

I have been asked to share some of my work on innovation. Below is a short piece from a publication that I am working on dealing with innovation systems.

While product and process innovation is better known and often receives the most attention, competitive advantage often emanates from organisational and business model innovations that emerge within societies. Innovation is a powerful explanatory factor behind differences in performance between firms, regions and countries.

According to Fagerberg et al. (2005:4-5), invention is the first occurrence of an idea for a new product or process, while innovation is the first attempt to carry it out in practice. Thus invention and innovation could be closely linked, although in most cases it is separated in time (sometimes decades or centuries), place and organisation. However, the fact that innovation typically emerge within a complex system is often overlooked. For instance, Schumpeter explained that the innovator that invented the steam locomotive still had to wait for others to develop the different aspects of the rail system before the locomotive could be commercially viable. The steam engine was initially invented in a completely different context, again illustrating how inventions are dependent on the context in which it arises.

While many innovations can be linked to well-funded research programmes, this is not always the case. Firms usually innovate because they believe there is a commercial benefit to the effort and costs involved, and this process typically starts by reviewing and re-combining existing production factors (Schumpeter, 1964/1911). Sometimes increased competition, changes in market structure or market demand, or changes in technological performance also affect the innovation process. To turn an invention into an innovation, a firm typically needs to combine several different types of knowledge, capabilities, skills and resources from within the organisation and the external environment. The role of this knowledge and learning interaction will be described in the next sub-chapter. The willingness or interest of an individual in tinkering and exploring better solutions is influenced in part by the organizational context of the innovator, but is also influenced by factors such as education or qualifications, meta-level factors such as culture, personal characteristics (such as patience, inquisitiveness or tolerance of failure) and the institutional environment. Other factors, such as competitive pressure, problem pressure, or social and economic incentives also play a role.

Frequently, policy makers, universities and technological supporting institutions erroneously describe innovation in a linear model that assumes that innovation is applied science. It is assumed to be “linear[1]” because it is believed that there are a series of well-defined stages that innovations go through from research (science), followed by development and finally production and marketing. In this linear model scientific research is deemed to be the most important step as it is the first step in the process. Although there are some cases that followed this path, these are the minority. Very often this line of reasoning is brought by people wanting to justify larger research budgets.

Notes

[1] The “linear” innovation process was first criticized by (Kline & Rosenburg, 1986)

Sources

FAGERBERG, J., MOWERY, D.C. & NELSON, R.R. 2005.  The Oxford handbook of innovation. Oxford ; New York: Oxford University Press.

KLINE, S. & ROSENBURG, N. 1986.  An overview of innovation. In The positive sum strategy: harnessing technology for economic growth. Landau, R. & Rosenburg, N. (Eds.), Washington, DC: National Academies Press, pp. 275-305.

SCHUMPETER, J. 1964/1911.  Theorie der wirtschaftlichen Entwicklung. Eine Untersuchung über Unternehmergewinn, Kapital, Kredit, Zins und den Konjunkturzyklus. Berlin: Duncker und Humblot.


Open data from Worldbank enables development

I know you will immediately point out that the Worldbank already announced on the 20th of April that they will open up access to it developmental data. But then I know that many development practitioners are working so close to the ground that data from the Worldbank may seem to be very far from the problems in rural economies.

But….

I think it is time that we stand back a little. Perhaps it is time to ask some old questions in new ways. And then to look at the data to see if it supports our logic.

For instance, why are development practitioners trying to stimulate “growth” in rural areas? Can you even remember why? Or maybe ask “what happened to wealth and prosperity?”.

Is building wealth in Africa still important to us? Or are we now all working on poverty alleviation?I. I think we all know that we have to find ways to stimulate local capital accumulation, savings and investment in Africa. But is this possible if we all work on rural development?

Please do not read anything into these questions, other that I sometimes get the feeling that we have forgotten what we are working for. And the more I play with the data from the Worldbank and Gapminder, the more I wonder if we are perhaps pushing the rope rather than pulling it.

Back to the data. Take a look at a report about the opportunities offered by better data according to some experts (Hans Rosling and Beth Noveck).  The data is now presented at a new website of the Worldbank. Hans Rosling is better known for Gapminder, a site that you should definitely look at for its innovative visual presentations of data.

To me it seems that we should be supporting the more advanced sectors in Africa. We should be asking questions about stimulating innovation, private sector development, and economic growth in the cities. We’ve known for more than 100 years already that cities play an important role in economic growth and prosperity of nations. That is why I bet that you prefer to live in a city if you are a knowledge worker! It makes me wonder why so many development practitioners seem to want to keep people in the rural areas…..

A year since my world flipped

Tomorrow is the 1st of May. The significance of this date is two-fold. Firstly, it is the day that I completed my PhD-Thesis 12 months ago. One year ago I hit ‘SAVE’ the last time on my thesis document. A 5 to 6 year long (depending on whether  you ask me or my wife) project came to an end, leaving me with evenings, weekends and holidays to spend (almost) any way I want. On many occasions I thought that I would not be able to finish that mammoth project.

Secondly, my best friend, mentor and business partner, Jorg Meyer-Stamer, passed away. Not only did his sudden departure leave me without a special friendship, Jorg also left me with a huge list of ideas, schemes, concepts, powerpoint slides and unfinished papers. It took me months just to figure out which ideas I could possibly pursue without his energy, insight and inquisitiveness (and pushing). Don’t get me wrong, I am very grateful for his legacy, but I have on more than one occasion caught myself thinking that he left me with too much raw material. I once or twice caught myself for blaming Jorg for not being here. Perhaps I simply miss arguing with Jorg about things that we both knew we could not change or influence, like the time when we were debating how local government has hijacked and almost completely stifled local economic development in South Africa. But more about that argument in another post.

What are some of the open questions that I am working on thanks to my late friend Jorg?

  • How can we get business leaders to take the lead in local economic development activities in a market orientated, trust building and positive externality creating way?
  • How can we get more people to understand markets, market failures and other forms of transactions in a non-theoretical but significant way?
  • How can we create a development practice field around innovation systems similar to the movement that now exists around value chain promotion? The follow-up to this is “how do we get more private sector development experts involved in this topic that is now dominated by academics and policy makers?”
  • How can we get people to shift their attention from micro-projects in LED towards initiatives and incremental improvement of territories?

Jorg always asked me the following questions:

  • How can we make this topic easier to understand without making it less sophisticated?
  • What happens when we combine insights from another academic or research discipline with development practice?
  • How do we take these ideas, practices and tools to scale so that more people can use it? You may not be aware of this, but Jorg was one of the first people to take a tool such as Porters 5 forces (designed to develop the strategy of a single firm) and develop it further into a workshop format that could be applied to many homogeneous firms simultaneously.
  • How can we make this practical and fun?
  • How can we knock our participants, colleagues, peers and partners socks of in our next workshop or event?

In this last year I have also managed to leave some pet topics behind, and I find that I am almost exclusively now focusing on private sector development, innovation systems promotion and value chains. I am spending a lot of time developing tools around the diagnosis of innovation systems, and this automatically led me to work almost exclusively in advanced sectors (it just happened naturally).

And you know what? The problems here in the advanced sector are the same than those we face in rural development, or agriculture. The target group now simply wear ties and have more zeros in their calculations. The advanced sectors also have low trust, also suffer from poor information flows (even if there is more information flowing), they also lack public goods (many public goods become privatised) and are also confronted by bullies and plagued by market failures. The big difference is that these people are overlooked by development practitioners and policy makers, and they have never heard of development facilitators or our ideas and facilitation methods.

Now isn’t that a nice problem to solve? Let me know if you want to join me on this journey.

While you ponder that. What challenges did Jorg leave you with?

  • What questions are you working on?
  • On which path are you now searching for new answers (and hopefully some new questions as well)?
  • This one is aimed at Colin 😉    Which answers have you found that need some good questions in order to make sense?

I challenge you to share your thoughts in public. Jorg always shared his learning, and he always took all of us along on his journeys. Let us celebrate his legacy by sharing our ideas, or at least our progress down the path.

Jorg and Shawn recording a LEDCast episode
Landschaftspark in Duisburg

Some things change slowly

Apologies for being so silent. I am currently leading a team that is analysing the innovation system in the electronics sector in South Africa. I cannot help but feel inspired to meet such brilliant business minds. And they all want to share, they all want to help to grow the country. It is so sad that many people see the succesful business people as the enemy in my homeland.

In the meantime, I quite Cicero. Listen to this wisdom from 55BC.

“The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance.”
– Cicero – 55 BC

A journey to change change

Holger Nauheimer and a small group of people are changing the way we see change in organizations! I am participating in the change journey, and so should you. Head over to the Change Journey now and share your experiences (or just learn from others)!

Take a look at the text below for an announcement about important training events on change.

Global Change Journey training courses: Join us for a fresh view on change in organizations

We all know that 60-80% of all change projects fail. It is time to change how we see change.

Holger Nauheimer, worldwide known as one of the key innovators in the change management field, has recently announced a new approach to change in organizations: The Change Journey. The concept radically departs from the blueprint approach of traditional change management models and is based on the fact that no two change processes are alike. Each organization that decides to embark on a change initiative has to reinvent itself and find its own path while mastering the uncertainty of the process. Holger and his colleague Vesa Purokuru have designed a tool that serves as a guide through such a journey – the Change Journey Map. With the Change Journey Map, individuals, teams and entire organizations are enabled to

  • initiate an open dialogue about the required change,
  • find common ground on the principles of the transformative process,
  • identify priority areas for intervention,
  • select the appropriate tools for driving that change, and
  • create a list of required actions in order to make change successful and sustainable.

The Change Journey Map is a tool for change leaders. It helps to refocus on the essential skill of facilitators: to ask questions which matter and which open up new perspectives. The Change Journey concept is compatible with any other organizational development philosophy and can be enriched by all other existing change management toolkits.

Learn more about on how change can happen in the 21st century and participate in one of the global workshops in Brussels, Amersfoort (NL), Los Angeles, Seattle, Washington D.C. and New York: http://www.changejourney.org/page/global-workshops.

The Change Journey supports 1WE (www.1we.com): For each workshop, course organizers will sponsor a rickshaw for a family in Bangladesh (http://www.1we.com/web/show/id=59754/langid=42).

Best wishes,

Shawn

Why the theories underlying economic development matters

I have been accused on several occasions of being too theoretical in my training approaches. These comments typically come from highly experienced development consultants and not from the target groups of my training, namely government officials, development facilitators and experts based within developmental organizations. I am not denying that I like to raise some more nerdy-like topics during my training, but this is based on my belief that you cannot be a developmental practitioner without understanding what the deeper knowledge bases are that we are working with.

I am always amused by this negative attitude towards of theoretical bases, especially when these consultants themselves start blurring the lines between the bases that they work from and the outcomes that they prefer.

Why do theories matter?

Bodies of knowledge, or theoretical basis are useful to development practitioners and are not only the domain of clever academics. Not only does a body of knowledge or theory provide us with some guiding principles, it also provides us with lines of inquiry or research questions. A theory also provides a boundary which typically explains what a theory does not cover. You could say that each theoretical base has its strengths (which means that it can structure, explain or questions certain phenomena) and its limitations (which means it does not provide structure, explanations or questions for other phenomena). So the main point is that a theory gives a development practitioner guidance as to what a theoretical base can inquiry, what questions it can find answers to, and which topics it does not provide much insight into. The main function thus of a theory is it helps us structure questions so that we can develop robust answers.

The importance of questions in development practice

Very often we find that developmental practitioners have posed very weak or generic questions at the start of a project or intervention. For instance, the question “how can we help the poor in this region?” is a poorly defined question as you will not be able to deal with the hundreds of answers ranging from “they must do it for themselves” all the way to “we must do it for them“.

Einstein is quoted as saying “if I had an hour to solve a problem and my life depended on the solution, I would spend the first 55 minutes determining the proper question to ask, for once I know the proper question, I could solve the problem in less than 5 minutes“.

So we have to ask more specific questions that lead to more precise questions. These questions are shaped by our theoretical bases. For instance, someone from an engineering background (using an engineering base) will ask that question slightly differently than someone from a business background (using business management) or a social worker (using certain social subjects).

The result of blurring the lines between theories is that questions becomes blurred, leading to vague answers. When questions becomes blurred by experienced consultants, manipulation may occur.  This can be achieved by sequencing questions in a way that people (beneficiaries, donors, organizations, political interests) are lead into one or two “solutions” or conclusions. These conclusions, recommendations, or solutions (call it what you will) are also sometimes known as “magic bullets” or recipes for success. We all know that magic bullets are blind, because they are so dependent on a specific context or the experience of the expert advising them.

You should never trust the answer of a research study or report if you do not understand which questions were asked to guide the study. Despite the content of the research, the questions gives an important hint as to which theoretical bases where used, which also provides us with a clue to the limitations (or blindspots) of that theory.

I am not arguing that we cannot combine theories, rather, I am arguing that we should always remember which theories we are combining in our work. For example, if you are promoting value chains and you are not basing your questions on business management theories (including production, industrial, strategic and other forms of management), then on what bases are you relying for your questions? Are you depending on gut feel, past experience, anecdotal experience, ideology or personal value systems? Or even worse, do you see value chain promotion as an answer to an unasked question? (What was that question again?). And let us say you are depending on the example I provided of business management as a basis for value chain promotion, then what are you blind to because of the choice of theory? Business management theories provide very little insight into social issues, market functioning (not to be confused with marketing management) poverty alleviation, or more technical or scientific issues that you are typically confronted with when working with value chains in a developmental context. I could have of course used another example, but this is one that I am frequently confronted with.

Perhaps it is worth your while to reflect for a few moments on which bases you draw when you come up with recommendations or are confronted by a specific problem. You will be surprised to find that there are many other bases that will provide you with different questions that you might want to consider reading up on. Perhaps you will even find some explanations why some of your favourite viewpoints seems to be so vulnerable or prone to failure within certain contexts, or why people resist some of your ideas. Let me know what you find!!

Link to evolution for everyone

Thank you Michael Meadon for sending me the link to the Evolution for Everyone blogsite by David Sloan Wilson. In a series of blog articles David describes evolution in economics from different perspectives. Reading these articles made me realise why local stakeholder groups are so ineffective in promoting or driving local economic growth. Very often the social dynamics and social power plays are ignored. We have to find better ways of recognising local initiatives, but we also have to be aware of the social selection process that allows for this emergence.

Lessons on leadership from a shirtless guy

Those of you that follows literature on the wisdom of crowds probably know of the video clip of this shirtless guy dancing in a crowd at a festival.

Derek Sivers recently dedicated a TED talk to this guy, and narrates some excellent leadership lessons. The video clip can be seen on Youtube, and a transcript of the narrative can be found on Derek’s site.

Thank you Tim Hadingham for bringing this clip to my attention!

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