Innovation, Technology and Knowledge

Charlie Karlsson, Börje Johansson, Roger Stough

• Publisher: Routledge
• Year: 2013
• Print ISBN: 9780415667784
• eBook ISBN: 9781136619519
• Topic: Business
• Subtopic: Business General
• Index: Business

In the last four decades the developed economies have developed into veritable knowledge economies at the same time as more and more economies have entered the road to economic development. Typical for the developments during this time has been substantially increased investments in research and development (R&D) to generate new knowledge and new technologies and increased investments in diffusing existing knowledge by means of education and thereby raising the volume of human capital.

However, many member states and regions within the EU are struggling with their economic development. This book explores the uneven patterns of development within the EU, discusses the relative effect of investments on innovation and productivity growth and looks at the mechanisms involved in economic development and policy.

1 Introduction

Innovation, Technology and Knowledge

Charlie Karlsson, Börge Johansson and Roger Stough

1.1 A Global Knowledge Economy

It is quite common to perceive that the contemporary economy has entered an era of a global knowledge economy. Never before in the history of mankind have such large resources been devoted to the generation of new knowledge and to the diffusion of knowledge by means of education. However, the spatial distribution of these resources over the globe is quite uneven. During most of the twentieth century, the dominating share of all investments in knowledge production and knowledge generation were made in the industrialised western economies, including Japan. Since around 1990 this picture has started to change substantially, with rapidly increasing knowledge investments taking place in the BRIC countries.¹ However, from a global perspective one can still claim that these investments retain a very uneven geographical distribution. Disregarding the uneven distribution, it seems appropriate to stress a set of fundamental changes in the global economy that have materialised in recent decades, altering the nature of the innovation process, bringing about global challenges, and stimulating cross-border phenomena and network formation responses. These changes have increased the demand for knowledge and at the same time fundamentally changed the conditions for knowledge production and innovation (cf., Archibugi & Coco, 2005) as outlined below under the headings (1) Nature of the R&D and innovation process, (2) Global system, (3) Cross-border phenomena, and (4) Network responses.

1.1.1 Nature of the R&D and Innovation Process

One can observe in recent times the emergence of new forms of organisation for knowledge-generation activities, associated with new approaches to the search for knowledge:

• Many firms have become more motivated and more systematic in searching for, protecting and exploiting scientific, technological and/or entrepreneurial knowledge to increase their competitiveness by means of better products and/or more efficient production processes (Granstrand, 1999; Suarez-Villa, 2000; Karlsson & Johansson, 2006). Firms are changing the way they innovate, while extending their search for access to sources of scientific and technological knowledge outside their national boundaries, and building networks of distributed research and development (R&D) including their own R&D facilities in foreign locations (Thursby & Thursby, 2006). MNFs’ (multinational firms’) global sourcing of science and technology² is changing the conditions for research and higher education organisations (Veugelers, 2010).
• The number of knowledge handlers, i.e. people that develop new knowledge or transfer and diffuse knowledge, is rapidly increasing. Since 1950 there has been a global expansion of R&D workers and knowledge handlers in general (Andersson & Beckman, 2009).
• Firms are also responding to the fact that R&D as well as innovation itself is changing: (i) the process of transforming knowledge and technology into commercially viable products and services occurs more rapidly than before due to reduced geographical barriers and more rapid transport of information and goods; (ii) the innovation process becomes gradually more complex and requires collaboration across disciplines and specialities; (iii) the innovation process evolves into more collaborative patterns, requiring collaboration between scientists, engineers and leading end-users, as well as between design, manufacturing, supply and marketing functions; (iv) the development of new products and services gets more expensive; and (v) the innovation process is becoming global in scope – i.e. new knowledge and new technologies are being created at centres of excellence around the globe.

1.1.2 Global System

The world economy is being transformed, step-wise, to a globally interconnected system.

• The phenomenon of globalisation refers to the ongoing expansion of international trade and foreign direct investments. In particular, the emerging new world is characterised by a globally integrated capital market, in which large shares of capital flows find their path outside the control of the banking system and governments.
• International cooperation has become a significant and increasingly important channel for the transfer and diffusion of knowledge in both the public and the private sectors (Archibugi & Coco, 2004). One reason behind this is that an increasing share of the research agenda consists of research questions that have a global dimension, such as climate change, energy, safety, and pandemics (Veugelers, 2010).
• An increasing number of players in terms of both nations and firms are able to enter both old and new playing grounds, which implies that the global economic competition has become more intense (Archibugi et al., 1999; Mowery & Nelson, 1999; Karlsson et al., 2010).

1.1.3 Cross-Border Phenomena

The so-called globalisation of economic and innovation activities is underpinned by a whole set of cross-border phenomena, which comprise interactions of various kinds:

• People with higher education and, in particular, students and researchers have become increasingly more internationally mobile. Thus, firms, research institutes and universities are progressively competing for talent in the global market (Veugelers, 2010). Such knowledge mobility shifts the absorption and creation capacity between places.
• The drivers to extend firms’ R&D beyond country borders include the need (i) for adaptation to local markets, (ii) for support to foreign manufacturing, (iii) to reach out globally for new knowledge and technologies, and (iv) to find and attract specific human talent.
• Rapid improvements in the transfer of information and in the transport of goods and people, together with substantial deregulation, have made the transfer across the globe of commodities, information, human capital and financial resources much easier (Held & McGrew, 1999; Antonelli, 2001; Freeman & Louca, 2001; Karlsson et al., 2010). In particular, the revolution in information and communication technologies (ICT) and the Internet have reduced the costs of international communication of information and intensified international exchange and communication in R&D and innovation. As a result, the costs of research and scientific activities as well as innovation have decreased drastically (Veugelers, 2010).

1.1.4 Network Responses

The cross-border interaction of the global economy has given rise to efforts to form networks that support and facilitate interaction between firms which belong to the same multinational company group (MNFs), and between firms in general.

• Innovation has in recent decades gone through a globalisation process involving innovation by MNFs’ overseas subsidiaries, the sourcing of R&D through alliances and joint ventures with foreign firms or universities, and/ or the exploitation of foreign technologies through patents and licences (Archibugi & Michie, 1997; Narula & Zanfei, 2005).
• Innovation processes are increasingly characterised by the following (Gerybadze & Reger, 1999): (i) multiple centres of knowledge in different locations; (ii) a combination of learning through the transfer of knowledge from the parent company and the knowledge created at a given location; and (iii) technology transfers, both between different geographical locations and between organisational units. Thus, the trend in the globalisation of technological activities – including knowledge-intensive services – has been unambiguously rising since the middle of the 1980s, following the broader internationalisation of production starting in the 1970s (Cantwell, 1995).
• The knowledge generation process has changed and become more networkdependent (Gibbons et al., 1994; Meyer-Kramer, 2000). As a consequence, partnerships and collaboration have become more important. International science and technology cooperation has increasingly also become a focus of policy-makers, who have become more and more willing to fund programs that stimulate the internationalisation of higher education and R&D (Veuge-lers, 2010). Collaboration makes it possible to increase the number of agents benefiting from knowledge and provides expanding learning opportunities (Archibugi & Michie, 1995). It allows partners to use each other’s expertise, and thus enriches the overall accessible know-how (Hagedoorn et al., 2000).
• The dynamic interplay and the increasing simultaneity of knowledge demand and knowledge supply has become obvious. The multi disciplinarity and heterogeneity of the actors involved in the knowledge generation process has grown. The increased networking character of knowledge creation and diffusion is evident and has many forms, including increased coauthorships among scientists, intensified university–industry R&D cooperation and the growing number of strategic R&D alliances between firms. However, the generation of knowledge is not defined by clear rules or governed by settled routines. Instead, it is based on a varying mix of theories and practice, of abstraction and aggregation, and of coupling of ideas and data from different sources and origins.

Against the above background of globalisation, new forms of innovation, and cross-border and network phenomena, the purpose of this book is to make a contribution to the state-of-the-art knowledge of the role and drivers of innovation, technology and knowledge in today’s global economy.

1.2 Innovation, Technology and Knowledge, and Economic Growth

Today, it is generally accepted that knowledge, technology and innovation are major factors contributing to economic growth and development and increased welfare, alongside labour and capital (Malecki, 1991; Lundvall & Foray, 1996; Nelson & Romer, 1996; Edquist & McKelvey, 2000). As regards micro phenomena, it is also appreciated that technology factors are critical for the competitiveness of contemporary firms (Kortum & Lerner, 1999; Jaffe, 2000; Shapiro, 2000; Baumol, 2002; van Zeebroeck et al., 2008). However, the globalization of R&D and innovation is making these relationships more complex and thus more important for scientists and policy-makers to analyse and understand. One of the most important insights from recent developments in the new growth and international trade theory has been the recognition of the significant role of knowledge flows between economic agents from different spatial units. For example, the long-term development of export market shares is not driven by price competition but rather by technology and quality competition based upon superior knowledge and technological capability (Soete, 1981, 1987; Greenhalg, 1990; Greenhalg et al., 1994; Maskus & Penubarti, 1995; Wakelin, 1998; Kleinknecht & Oostendorp, 2002; Legler & Krawczyk, 2006; Madsen, 2008).

Knowledge is acknowledged as a critical factor at the micro level, at the regional level, at the national level and at the supra-regional level for preserving and developing competitiveness. In order to stay ahead of competitors in the relevant market niches, firms have to accommodate and develop new knowledge to supply the innovations that are needed to meet the demands of sophisticated and price-sensitive customers at home as well as abroad to stay ahead of competitors in the relevant market niches. Thus, the competitiveness of a firm is at least partly the result of its capacity to generate but also to find, absorb and assimilate new scientific, technological and entrepreneurial knowledge developed elsewhere – i.e. its absorptive capacity (Cohen & Levinthal, 1990). Major dimensions of this capacity of firms to absorb and to accommodate new knowledge are their stock of human capital, and their own investments in scientific and technological research.

At the regional level, competitiveness, and thus regional growth, development and welfare, is driven by endogenous, decentralised and localised regional factors, and here the regional capacity to absorb knowledge developed elsewhere as well as to develop new knowledge plays a central role. Even if the importance of regions has increased substantially, similar factors apply at the national level, and here it is suggested by many that the design of the national innovation systems plays a decisive role (Rosenberg, 1982; Nelson, 1984, 1993). The idea behind the concept of national innovation systems is that nations provide a milieu for their firms to compete in international markets, and, in particular, that the innovative milieu they offer affects the capacity of their firms to generate and develop innovations.

It is important to observe that the relationships between internationalisation and innovation are both complex and reciprocal. In other words, internationalisation is not only about commercialising technologies developed in a certain country. Depending on the industry, other motivations, such as resource access and control, technology development, and the development of shared network assets, can also be of importance. However, while innovation often stimulates internationalisation, there are also considerable evidences of the opposite effect – i.e. that internationalisation itself stimulates learning and innovation within international firms (Andersson and Lööf, 2009; Lööf and Andersson, 2009).

The supra-national level may be illustrated by the triad North America (US)– Europe (EU)–East Asia (Japan). On this level, too, the capacity to absorb and to develop new knowledge is critical for competitiveness and for economic growth and development (Ohmae, 1995). Even if each of the triad regions makes very substantial investments in R&D at home, they can never afford to disregard the new knowledge developed in the other two regions, if they in the long run want to preserve their competitiveness in different markets. Thus, how to develop the means to promote scientific and technological activities, to absorb knowledge developed elsewhere, to foster innovation within firms and to upgrade ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright
• Contents
• List of figures
• List of tables
• Notes on contributors
• Preface
• 1. Introduction: innovation, technology and knowledge
• Part I: Systems of innovation
• Part II: Innovations in regions
• Part III: Social capital and innovations
• Index