Transcript here

Competition and cohesion developing a sustainable innovation
economy
EPRC Seminar
1 November 2007
Contents
• Context
• Challenges for smaller countries
and regions
• Scotland’s performance
– Innovation
• Responding to the challenges
Globalisation
– still likely to be the major influence
The growing significance of developing countries
(scale and nature)
China’s R&D expenditure now = Japan’s (OECD)
Is continued globalisation inevitable?
•Working assumption that globalisation will continue to develop, but…
•…“Further progress in global economic integration should not be taken
for granted” Ben Bernanke, August 2006
•Constraints on globalisation: climate change, trade protection,
social/political backlash, World Bank Dec. 2006
Shell global scenarios to 2025
legalistic
pragmatic
dogmatic
Climate change and economic development
- constraint or stimulus?
An agenda of:
•productivity improvement
•product and process innovation
•employee attraction
•customer loyalty
•risk management
•investor relations
The evolving nature of business
•
•
•
•
•
•
•
•
‘Industrial Economy’
Vertical integration
Standardised
Clear value chain
Distinction between
producer and consumer
Specific content producers
Limited channels
Based on physical assets
Decreasing returns
•
•
•
•
•
•
•
•
‘Innovation Economy’
Flexible outsourcing
Customised/personalised
Blurred value chain
Consumer contribution to
production
Multiple content producers
Multiple channels
Value of intangibles
Increasing returns
Main findings:
• investment double
traditional measure
• output 13% higher
in 2004
• ratio of investment
to output rising not
falling
• productivity and
capital deepening
higher
• intangible
investment levels
similar to US
Globalisation – Flat or Spiky?
The explosion
of advanced
technologies
now means
that suddenly
knowledge
pools and
resources have
connected all
over the planet,
levelling the
playing field as
never before,
so that each of
us is potentially
an equal and
competitor of
the other.
Thomas Friedman ‘The
World is Flat’ 2006
Increasing returns to scale
Strongest in high value/knowledge activities
“Because
globalization
has increased
the returns to
innovation…..
it has
strengthened
the lure that
innovation
centers hold
for our
planet’s best
and brightest,
reinforcing
the spikiness
of wealth and
economic
production.”
Richard Florida,
Atlantic Monthly,
October 2005
Scotland’s closest global centre
- a virtuous development cycle
Net graduate gain/loss 2003/04
10000
8000
6000
GVA per head (£) 1999 & 2004
4000
2000
25,000
0
1999
20,000
-2000
2004
-4000
15,000
M
id
la
nd
s
sh
i re
Ea
st
Yo
rk
W
al
es
Ea
st
or
th
N
W
es
t
or
th
N
Sc
ot
la
nd
Ire
la
nd
W
es
tM
id
la
nd
s
So
ut
h
W
es
t
Ea
st
or
th
er
n
Ea
st
N
10,000
So
ut
h
Lo
nd
on
-6000
5,000
W
al
es
Lo
nd
on
So
ut
h
Ea
Ea
st
st
of
E
ng
la
nd
Sc
ot
la
nd
So
ut
h
W
es
Ea
t
st
M
id
la
W
nd
es
s
tM
id
la
nd
s
N
or
th
W
es
t
Yo
rk
sh
N
or
i re
th
er
n
Ire
la
nd
N
or
th
Ea
st
0
Private Sector
Knowledge
Intensity
Productivity drivers - average ranking
Innovation, enterprise, creativity, skills, investment
12
10
8
6
4
2
0
South East
London
East of
England
South
West
Scotland
North
West
East
Midlands
West
Midlands
N Ireland
YorksHumber
Wales
North East
European Concentration
Metropolitan European growth Areas (MEGAs)
‘European Pentagon’
20% area
40% population
50% GDP
The sustainable development challenge for
smaller countries and regions
• Build as much critical mass as possible
– Help develop vibrant innovation systems and globally
significant industries (niches)
– Specialism plus diversification
• Better connect to global innovation centres
– Markets, Ideas, Expertise, Finance, Talent etc
• Improve carbon efficiency
– Greater productivity
– Source of innovation
Measuring Scotland’s economic progress
Smart Successful Scotland – 2006 report
“A significant challenge
that remains is to achieve a
decisive and sustained
breakthrough in the
indicators of the strength
of Scotland’s business
base, through building up
the stock of businesses,
raising their levels of
innovation and productivity
and increasing their global
competitiveness.”
2005 Report
NB trend relative to OECD Q1 average
European Innovation Scoreboard
European Innovation Scoreboard
203 ‘regions’ - ave. size 2.5mn
Score range 0.9 - 0.01
Higher Education R & D (% of GDP)
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
Finland Scotland
Japan Germany France
1999
UK
EU 25
OECD
Canada
Sw eden Canada
UK
0.00
Italy
USA
Ireland
2004
BERD as a % of GDP
3.0
2.5
2.0
1.5
1.0
1999
2005 (USA, Japan, OECD 2004)
Italy
Scotland
Ireland
EU 25
France
OECD
Germany
USA
Japan
Sweden
0.0
Finland
0.5
0.0
Scotland
1999
2005
London
North East
Yorkshire & the
Humber
Northern Ireland
Wales
West Midlands
South West
East Midlands
North West
South East
East of England
Business R & D (% of GDP)
3.5
3.0
2.5
2.0
1.5
1.0
0.5
-
1996
2005
Construction
Extractive
industries
Services
Other
manufactured
Products
Transport
Equipment &
Aerospace
Electrical
Machinery
Mechanical
Engineering
Chemicals, Manmade fibres
Pharmaceuticals
etc
£k current prices
£mn current prices
BERD in Scotland
600
500
400
300
200
100
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
BERD in Scotland by sector
250 000
200 000
150 000
100 000
50 000
4th COMMUNITY INNOVATION SURVEY
PROFILING SCOTLAND’S INNOVATION PERFORMANCE
Dr. Mark Freel, University of Ottawa and Prof. Richard Harrison, Queen’s University Belfast
“worse than the best, but much like the rest”
4th COMMUNITY INNOVATION SURVEY
Innovation active firms
% of firms
60
50
40
30
Scotland
UK
2001
2005
Innovation in production industries
% of firms active
90
80
70
60
50
Small
Medium
Scotland
UK
Large
4th COMMUNITY INNOVATION SURVEY
Four types of hidden innovation:
“We need a broad-based
innovation policy that reaches
beyond science and technology
to embrace the ‘hidden
innovation’ that occurs in all
sectors of our economy and
society.”
Type I: science and technology
but excluded from traditional
indicators
Type II: non-scientific and
technological forms such as new
forms of organisation and process
Type III: the novel combination of
existing technologies and
processes
Type IV: takes place ‘under the
radar’ of many surveys
RBS R&D investment £1/3bn+
Strategic issues for Scottish economy
(and other smaller countries and regions?)
Strengths
Weaknesses
 world class firms
 high potential industries
 productivity
 business stock
 research base
 graduate output
 international cities + rural
environment
 internationally recognised
identity, heritage, culture
 small networks





 existing and emerging
Opportunities






technological advance
global markets/partners
demanding consumers
new business models
climate change response
pace of change
growth/global firms
business R &D
start ups
infrastructure gaps
wasted human potential
market scale
Threats






more intense competition
new competitors
population (now more +ve)
global uncertainty e.g. energy
fragmentation of effort
insufficient urgency
Responding to challenges requires genuine
collaboration and alignment
Skills
International &
Infrastructure
Business
Development
Sustainable Development – Equal Opportunities
•Increasingly
recognised elsewhere.
•A key feature of
Finland’s innovation
system and the Irish
‘miracle’.
•Often emerges from
extreme adversity.
Private Investment
(Individuals, Companies, Industry groups, Trades Unions, voluntary organisations etc)
Development agency - catalyst for more/better/faster investment
Public investment
(Government, Local Government, public agencies, EU Partnerships etc)
Schools
FE/HE
Sector Skills Councils
Transport, Water
Planning
Promotion of Scotland
Company programmes
Research - K-transfer
Two views of collaboration:
“the suppression of mutual loathing in pursuit of government funding”
or
“having people who see the broader picture, who seek to understand your
business and have some empathy for you helps make alliances strong.”
Sustainable
economic
development
Coherence, scale and collaboration through
industry focus...
• Global growth
• Significant Scottish
strength and/or
potential
– corporate/research
– other?
• Industry leadership
• Innovation system
• Greater, more focussed
demand
…and through spatial focus
Cities boost regions by
providing:
•
Critical mass of
knowledge institutions
•
A vibrant environment
for knowledge transfer
•
Strategic services
•
Highly paid jobs
•
Culture, leisure and
sport
•
Transport hubs
•
International profile
“A region will be successful if its cities are successful
and cities will flourish if the wider region flourishes.”
European Commission (2005)
Cities rely on regions
for:
•
Space for major
projects
•
A wider skills base
•
A wider range of
sites and premises
•
A wider range of
housing options
•
Distinctive centres niche experiences
•
Opportunities for
countryside leisure
•Economic geography matters more - but boundaries matter less, and will vary
• Need for scale, connectivity (physical and psychological), flexibility, speed + local engagement
Cross border collaboration
Concluding thoughts
• Sustainable development not a zero sum
game of beggar thy neighbour...
• ...focus on stimulating investment to
realise potential and add value
• No ‘silver bullet’ - systemic approach
• Be flexible - adapt to change and chance ‘strategic opportunism’
• Keep a broad mind
– sources of innovation
– assessing value
• Focus on what unites you