Innovation Systems Research Network MCRI Theme I: Social Nature of the Innovation Process (SNIP) Charles H. Davis, Ph.D. Faculty of Communication & Design Rogers Communications Centre Ryerson University, Toronto Innovation Systems Research Network 4 May, 2006

Innovation Systems Research Network Review: –Main hypothesis and research question –Our starting points regarding the social nature of the innovation process Challenges and opportunities –Theory –Analytical Method –Practice An overview of the SNIP Interview Guide 1.1

Innovation Systems Research Network Main hypothesis and research question The social characteristics of a city- region have now become its principal economic assets –How do the social characteristics and processes of city-regions determine their economic dynamism and vitality as centres of innovation and creativity?

Innovation Systems Research Network Starting points: social nature of the innovation process 1 Knowledge and learning are central features in the process of creation of economic value Innovation is social organized and interactive The meso-level (region) is the key site of innovation because of the importance of proximity in exchanges of tacit knowledge

Innovation Systems Research Network Starting points: social nature of the innovation process 2 Institutions shape flows of knowledge –Institutions may be national (or international, regional, or local) Local agglomerations have global knowledge pipelines City-regions are advantaged by their diversity and size

Innovation Systems Research Network Challenges & opportunities: SNIP theory 1 Marshall or Jacobs? –Marshallian geographical specialization Localization economies increase with the number of co- located firms Proximity favors intra-industry knowledge flows Prevailing models such as the Porter Diamond seek to describe the structure of geographically specialized clusters: –Co-location of suppliers, principals, customers, rivals, and supporting institutions favors interactive learning and flows of knowledge Geographically specialized industry, by definition, services external markets

Innovation Systems Research Network Challenges & opportunities: SNIP theory 2 Marshall or Jacobs? –Jacobs says that diversity, not specialization, provides the critical externality Empirical evidence for urbanization economies is inconclusive But industries cannot trade indiscriminately with other industries –The keys to urbanization economies may be ICTs, services, and cultural industries

Innovation Systems Research Network Challenges & opportunities: SNIP theory 3 Marshall or Jacobs? –ICTs are “general purpose technologies” and they service all sectors –Current wave of ICT-enablement is in the service and cultural industries, which are highly concentrated in urban regions Financial services, government, healthcare, media and other creative industries

Innovation Systems Research Network Challenges & opportunities: SNIP theory 4 Marshall or Jacobs? –Note the importance of localized inter- sectoral value creation processes in the Jacobs model –However, service industries and creative industries are also highly concentrated, suggesting that Marshallian dynamics and Jacobean dynamics may be at play.

Innovation Systems Research Network Challenges & opportunities: SNIP theory 4 Marshall or Jacobs? –What are the social processes of innovation in the Jacobs model? –“creative industries” have particular characteristics that may presage coming organizational forms in other industries Customer experience is the goal (utility is not the only value) Constant innovation at high risk Constant challenge to integrate business and creative knowledge Cult of youth and cult of the celebrity

Innovation Systems Research Network Challenges & opportunities: SNIP theory 5 –“creative industries” have particular characteristics that may presage coming organizational forms in other industries Highly concentrated industry and a vast sea of contingent labour and micro-enterprises Portfolio careers Turmoil due to disruption of business models and distribution channels by ICTs High levels of uncertainty Haphazard innovation support system

Innovation Systems Research Network Challenges & opportunities: SNIP theory 6 The functional specialization hypothesis (Duranton & Puga) –ICTs enable business functions to be coordinated remotely –Functions can be located wherever it makes business sense to locate them Customer service and back office functions are located where labor is inexpensive Production is located where the economics of supply, transportation, and markets dictate Executive functions located in major metropolitan areas Where to locate creative & R&D functions? –ICT-mediated linkages can interpreted in terms of institutional, cultural, cognitive, or other kinds of proximity –Note: dispersed business functions CANNOT be tracked via NAICS codes

Innovation Systems Research Network Challenges & opportunities: analytical methods How to operationalize these key concepts: –Knowledge and knowledge flows –Learning –Creativity Maybe also: –Spillover –Untraded interdependencies

Innovation Systems Research Network Challenges & opportunities: analytical methods How to extend our analytical toolkit –Qualitative research -> grounded theory? –Survey research -> economic performance as the dependent variable? –Social network analysis? –Other methods (ethnography, cognitive mapping?)

Innovation Systems Research Network Challenges & opportunities: practice How can our research help to improve these key innovation practices? –Public innovation support –Policy planning and coordination –Education –Firm-level innovation practices Strategy Product innovation Business development & marketing

Innovation Systems Research Network Overview of the SNIP interview guide This interview guide has 3 sections –1) firm-level innovation –2) Appendix A: firm fact sheet –3) Appendix B: R&D linkages with universities or public research organizations

Innovation Systems Research Network 1) firms 1.Location and contact information 2.What are the firm’s main products or services? 3.Workforce 1.Characteristics of manager 2.Characteristics of employees 1.Directors, supervisors, professional/technical workers, creative workers, administrative workers, unskilled workers 2.% of employees, % with university degrees, % hired in past 3 years, % who were recruited from outside the city in past 3 years

Innovation Systems Research Network 1) firms 4.Innovation 1.% revenues from recent products or services 2.Challenges faced by most recent product or service introduction 3.Estimate % of expenditures devoted to various innovation activities [list] 4.Sources of most advanced technology used by the firm 5.IP practices 6.Licenses from public institutions

Innovation Systems Research Network 1) firms 5. Customers and competition 1.location of important customers? 2.Sources of competitive advantage – top three from list of 21; describe what firm has done 3.Location of major competitors? 4.Intensity of competition locally, nationally, internationally?

Innovation Systems Research Network 1) firms 6. Knowledge flows 6.1 script: please think about 3 firms [or other innovation players] with which your company has regular relationships about important matters during the past three years Of these three, select the one with the MOST FREQUENT contacts Are the contacts mainly formal or mainly informal (describe) What is most frequently discussed (from list) What type of information is generally exchanged? (from mainly unwritten to mainly written information) Repeat procedure with firms #2 and #3

Innovation Systems Research Network 1) firms 7.Interactions with public R&D institutions 1.How does partnering fit into firm’s R&D strategy? 2.Has the firm worked on any projects with public institutions or universities? (If yes, go to appendix B)

Innovation Systems Research Network Appendix A: firm fact sheet % employment change (3 years) Ownership; % residing in Canada 2005 revenues of business unit % revenue growth (3 years) Projected revenue growth, next 3 years Market distribution: % of sales in province, Canada, US, other international

Innovation Systems Research Network Appendix B: R&D linkages with universities or public research organizations What types of interaction? Who interacts? What kinds of exchanges? What are most successful methods for transferring knowledge and technology to firms? Table of benefits to industry partner and to the university (list of about 15 possible benefits)

Innovation Systems Research Network The end. Thank you! Questions or comments?