Science-based innovation: International experiences and EC projects for Ukraine Prof Ivan Samson

1. “Kharkiv Technologies” International WorkshopTechnology Transfer and Innovation Support Networks:International Experience and Prospects for Ukraine. Science-based innovation: International experiences and EC projects for Ukraine Prof Ivan Samson Grenoble University EC project Team Leader Kharkov, September 3-4, 2008

2. Contents • 1-Science-based innovation • 2 - The EU experiences of Science Parks (Saxenian, Bengston & Lind) • 3-The American experiences of Science cities (Etzkowitz) • 4 - Russian success story: St. Petersburg’s software cluster • 5 – Local governments and the Triple Helix model of Etzkovitz and Leydesdorff • 6 – The EU support to innovation in Ukraine

3. 1-Science-based innovation

4. The three factors of innovation performance • According to experts, the key of innovation and competitiveness is in the combination of three factors (Peter Nijkamp) • Knowledge: the macro-factors of education and R&D policies, as well as the micro-factors of skill training and the ability to learn and accumulate collective know-how in organisations; • Entrepreneurship linked to knowledge : the point is not only to have good scientists, but good entrepreneurs able to take risks and became agents of change; • Favorable environment as innovation-friendly culture and institutional arrangements and infrastructure • Ukraine has knowledge, but entrepreneurs and environment?

5. The two sources of innovation • The world practice shows two ways of generating innovations: • Research/supply driven innovation originating in the laboratories of the academic institutions and large industry organisation, and then channelling into development departments and manufacturing activities, as well as small high-tech start-ups quite often born from spin-offs of large companies or research centres; • Demand/consumer driven innovation originating both in marketing departments of large companies as well as in the day-to-day activity of SMEs.

6. The key problem of this way of generating high-tech production is “transmission of innovations” or technology transfer from science to production. • The technology transfer was administratively ensured in FSU within large complex merging Science centres and large industries. • Today these complex are no longer working because of cuts in budget spendings and industry privatisation and restructuring. • The challenge for Ukraine is to rebuild the chain from science to industry

7. Two main world trends in technology transfer: clusters and technology networks • These forms are both means of communication between Research and Production as well as interactions between firms. • Clusters are rather typical of EU and networks are well developed in the USA, but both forms are more or less developed everywhere. • The main difference is that clusters are geographical agglomerations of research and productive units, when networks rely mainly on distance connections between the units.

8. The clusters are competitive because of the externalities (product inputs, knowledge, economies of scales, cooperations in problem solving) they provide, and there are innovative thanks to the variety of the units and the density of interactions; • they perform specially in the transfers of tacit knowledge (discoveries, know-how) that require face-to-face interactions, as well as in synergies, spin-offs and technology spill-overs; • Technology networks are competitive because they are based on top up-to-date discoveries and innovations, they gather the best codified knowledge in the world and still some less codified knowledge, and they provide the participants the resources of several territories; • The strength of the cluster is based on the agglomeration and concentration effects as well as in the community created by its long history • the strength of the network is its plasticity and flexibility enabling worldwide permanent updates.

9. 2 - The EU experiences of Science Parks (Saxenian, Bengston & Lind)

10. In many European countries the setting up of science or technology parks is an important strategy in creating territorial attractiveness and advantage. • Generally these are seen as growth engines spurring economic growth not only in the park itself but also in the region where the science park is located. • Three of the most interesting cases of science and technology parks are the pioneering parks in Great Britain, Cambridge Science Park; in France, ZIRST Grenoble and in Sweden, Ideon Science Park, Lund (ISD). • The three cases present striking similarities related to the start of science parks and subsequent growth of high-tech activity in the regional areas. • In the 1970s Cambridge was a typical British university town with virtually no industry, Grenoble was an industry town with strong applied research centres and Lund was a university town with some industry. • Grenoble had well developed relations between industry and academia, while in Cambridge and Lund the relations were few and weak. Despite these differences high-tech activity emerged at similar times in a unique local dynamic environment.

11. In terms of university industry interaction Lund resembled the Cambridge situation, with a lacking tradition of industry-university relationships. Instead, both places had strong traditional academic values.The relations between industry and higher education had long traditions in the area and were considered to be a part of the local identity in Grenoble. • In Cambridge influential scientists at key colleges, well acquainted with experiences at MIT and Stanford in the US, were the key drivers of the process. • In Grenoble, local government politicians with a background in science and research, a few local industry managers and research institute directors played key roles in establishing the first science park. • In both Grenoble and Cambridge the first businesses to localise in the parks were primarily spin-offs from established companies in computer and electronics. • In Lund it is very uncommon for researchers and scientists to be involved in local government as politicians. In Grenoble, local government politicians acted as relational entrepreneurs with good relations to academia, the political system and industry.

12. Thus the development of the process depends both on the available local resources and on initiatives of local actors. • The major challenge in Lund was to create a new vision of a high-tech innovation system (frame breaking) and to relate actors from the university, industry and the political system with each other. • These activities and roles could be related to the first step, creating a community of interest in Saxenian’s model of a new regional innovation system. • The science park experience has specifically highlighted the importance of certain individuals in this first part of the process; that is the role of the relational entrepreneurs. • They all had prior experience or good contacts with all three types of actors: the university, the industry and the political system.

13. 3-The American experiences of Science cities (Etzkowitz)

14. The two leading U.S. high-tech regions, Route 128 and Silicon Valley, were built on “Brownfield” and “Greenfield” sites. • Drawing upon academic, business and government resources, a coalition of New England academic institutions and financial interests created a new model of regional economic development in the early post-war. • Follow-on regions typically identify successful models and adapt them to meet their needs. • Thus, the venture capital model was transferred from Boston to northern California to expand firm formation activity in the emerging semi-conductor industry. • Silicon Valley, based on a flat network structure, is currently being transformed into a planetary system of strong entities with satellites

15. How did these two strongly contrasting regions develop as the leading centres of science-based industry in the U.S. in subsequent decades? • A simple answer is the presence of MIT and Stanford. While these two universities played an important role in transforming their regions it was not the university by itself that made the difference. • The emergence of polyvalent research fields with simultaneous theoretical, technological and commercial potential provides a substrate for the growth of science based clusters.

16. The strategy that evolved was based on a synthesis of university-business-government elements into a venture capital instrument: government changing investment rules; the university providing technology, human resources and capital to form new firms and business providing capital and legitimation to the new venture entity. • Immediately after the war, Compton organized a consortium of universities, investment banks and insurance companies to found the first venture capital firm, American Research and Development (ARD) through sale of equity (stock) in the firm.

17. Basic component of American model is an entrepreneurial university that rests on four pillars: • (1) legal control over academic resources, including physical property in university lands and buildings and intellectual property emanating from research; • (2) organizational capacity to transfer technology through patenting, licensing and incubation; • (3) an entrepreneurial ethos among administrators, faculty and students and; • (4) academic leadership able to formulate and implement a strategic vision.

18. 4 - Russian success story: St. Petersburg’s software cluster

19. The growth rate of Russian software exports were about 40% and 30% in 2004 and 2005 respectively, in 2006 they increased by almost 54% and accounted for approximately $1.5 billion, which makes Russia the third largest player in the global outsourcing market, just after India and China. • Since 1991 many former scientific workers, university professors and graduates have founded the first enterprises specialized in the SaS (software as service). • At the time, the economic context characterized by the political and economic instability in Russia forced these pioneers to work exclusively for the Western clients. This openness with the regards to the global market enabled the constant knowledge flow between the world’s high tech centres, especially with the Silicon Valley. Moreover, this process was reinforced thank to the movement of the Russian diaspora.

20. In 1999 several St. Petersburg’s software firms created the first Association FortRoss in order to promote St. Petersburg’s software sector abroad and to construct an image of a country specialized in the high-end outsourcing.the foundation of Fort Ross (RUSSOFT) became the turning point in the development of the cluster and the whole Russian software sector. • Today there are about 150-200 software enterprises in St. Petersburg. Among these companies there are a dozen large firms employing approximately 400 programmers. • Since 2000 St. Petersburg has become a well known cluster not only thanks to its local companies (Arcadia, Digital Design, eVelopers, Lanit Tercom, Reksoft, SJ Labs), but also due to the research centers of multinational companies such as Siemens, LG, Alcatel, Motorola, Sun Microsystems, Intel, Google, HP.

21. Moreover, today the city hosts the Special Innovative Economic Zones and several IT parks established by the local universities. • Thus, the city proved to be not only the attractive software outsourcing destination in terms of the cost reduction, but progressively evolved into developed software cluster highly integrated in the global value chain with a complex network articulating industry, universities and the State.

22. 5 – Local governments and the Triple Helix model ofof Etzkovitz and Leydesdorff

23. Derived from the Boston regional organizing experience in the 1930’s and 40s, the triple helix model University-Industry-Government comprises three basic elements: • first, a more prominent role for the university in innovation; • second, a movement toward collaborative relationships among the three major institutional spheres in which innovation policy is increasingly an outcome of interaction among university, industry and government; • thirdly, in addition to fulfilling their traditional functions, each institutional sphere also ‘takes the role of the other’ Thus, academia is a source of firm-formation in addition to its traditional role as a provider of trained persons and research. Government helps to support the new developments through changes in the regulatory environment, tax incentives and provision of public venture capital. Industry takes the role of the university in developing training and research, often at the same high level as universities.

24. In recent decades, government has played an entrepreneurial role, revising the rules for interaction among the institutional spheres. For example, in the U.S. in 1980, and more recently in Japan and Denmark, government has transferred the intellectual property rights, deriving from its research funding, to universities in order to incentivize entrepreneurial behaviour. • The model was expanded through analysis of areas where the role of one sphere in innovation, either predominated or was lacking, such as the State in Eastern Europe before and after the Berlin Wall. Too much, or too little, government impeded innovation. • As the economic implications of research arise ever closer in time to the making of a discovery, the location of research becomes a political issue with regional relevance. Regions with extensive research resources conflict with those that wish to develop similar strengths, creating pressures to expand research funding.

25. Academic advance and regional growth are mutually supportive goals. The need to periodically renew the technological capabilities of a region leads government, as well as companies and universities themselves, to explore ways for knowledge producing institutions to make a greater contribution to the economy and society. • This opens the way to a more elaborated view of the process creating a high-tech regional innovation system. There are also individuals and organisations that have showed institutional leadership in terms of envisioning a new innovation system in the region and have worked hard to create the right conditions for this process to unfold. • Local government as relational entrepreneurs make more than adapting the rules: their proximity with actors make them unique actors capable to combine science an business. This opens the way to the decentralisation of innovation policy in creating regional or local innovation systems

26. 6 – The EU support to innovation in Ukraine

27. The Cabinet of Ministers of Ukraine adopted the Resolution № 447 of May 14, 2008: STATE PRINCIPAL ECONOMIC PROGRAMME: Foundation of Innovative Infrastructure in Ukraine” for 2009 – 2013 • This means the relaunching of efforts started in 1999 • Current competitiveness of the economy rests on energy and material intensive sectors • This economic specialisation neither ensures a sustainable growth to the country… • …nor corresponds to its intellectual resources that represented almost 25% of FSU human capital

28. The EC supports projects to science and innovation in Ukraine • The 2006 Tacis National Action Programme (NAP) included a large envelope for projects on research and innovation • Our team has to design, in coordination with major local stakeholders and EC, the concrete projects that will be put in tender process in 2009 and implemented until end 2011 • The wokshop of Kharkov is a key moment for identifying the main obstacles to innovation , the ways to overcome them and the first outlines of possible projects • Direct beneficiaries and detailed project ToR will be identified in September and October

29. Four key issues • We have identified four major issues where precise projects are likely to bring concrete progress: • The regulation and the legal environment for Research and Innovation in Ukraine • Science based innovation and technology transfers • The financial support to Research and Innovation in Ukraine • The support to innovative SME and transnational networks • ……and EDUCATION !

30. In each key issue, one project providing EU and local technical assistance will develop a new mechanism or institution on a pilot basis showing policy makers and other stakeholders what could be successful • The EU projects will bring concrete means such as expertise, networking, study tours, training, capacity building… • The design of the projects to be implemented before end 2011, with definition of components and of concrete outputs, will come out from the mix of our know how and YOUR suggestions !!