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POLITICAL ECONOMY OF GROWTH SECS-P01, CFU 9 Finance and Development academic year 2016-17
9. INNOVATION TRANSFER Roberto Pasca di Magliano Fondazione Roma Sapienza-Cooperazione Internazionale
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Model Background The Solow growth model is the starting point to determine why growth differs across similar countries it builds on the Cobb-Douglas production model by adding a theory of capital accumulation developed in the mid-1950s by Robert Solow of MIT, it is the basis for the Nobel Prize he received in 1987 the accumulation of capital is a possible engine of long-run economic growth
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Innovation= value creation
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Value Creation Innovation converts reasearch into economic value and creation of specialized jobs “Capitalism is based on a process of continuous revolution based on technological innovation through phases in which new structures emerge and old ones are destroyed. "This process of 'creative destruction' is the fundamental fact of capitalism” ( Joseph Schumpeter)
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Innovation is the action of making new products or new methodologies/process that did not exist before In order to innovate one has to focus applied research on technology transfer towards the business sector : Identification of new technologies and their industrial application Protection of the investment into new technologies via patent, copyrights, license, design rights Definition and development of appropriate marketing strategy Technology transfer via licensing and commercial agreement towards existing companies or to new stratups Innovation: Makes a discontinuity in traditional knowledge, and knowhow,. This discontinuty increase overall productivity and labour productivity: with the some ammount of resources we can produce more goods (development) or with less resources we can produce the some ammount of goods than before (sustenability) Development and sustenability are linked to technology diffusion and production process, quality oflife (rise of income or more spare time) and to the environment (improved usage of resource)
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The new enterprenerual capitalism of Research & Innovation in Italy
It is a tech-based capitalism focused on researh as the main levr for competition and development It is a capitalism based on innovative eneterpreneurs with an advanced university curriculum It is a capitalism that favour technology and innovation diffusion (via spill overs and knowledge sharing) and and the creation of new strat ups with a direct benefit fo the overall economy It is a capitalism that is able to actract foreign investment as both acquisition of equity into existing companies and green field investments
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Life cycle of innovatoive firms and finacing resouces
Idea Spin-off Start-up market Continous innovation of the product Final organization structure marketing e6 sales investments Partneship and acquisitions Company set up Innovative prototype Commercial feed backs Tuning of innovative product Commercial structure Strategic Parteneship Product definition Business plan Market analysis Analysisi and idea evaluation Activity Risk High Medium Low - Incubatorors - Business Angels - Public Admin. support Structure and what it does Venture Capital Private Equity Support - Private Equity - IPO Family financing Pre- seed financing Family financingSeed Second Round FInancingI Venture capital Expansion Capital Pre-seed financing: typically involved in the analysis and evaluation of the idea Seed financing: It intervenes in the testing phase of the innovative idea. The idea is often channeled into paths of incubation to determine the product, the technical validity and the target market Start up financing: It occurs at an advanced stage of the idea. The idea became a prototype of which must be checked for validity commercial
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Start up e gli spin-off are unattractive to the conventional credit
RIS K «Lab-pure» Research Base Research Market Test Applied Research Patents and Licences Prototype 100% financing from Public Institutions ( Incentives, contributions, scholarships,…) Partnership private-public sector (Equity Capital, Loans, guarantees) Venture Capital hi tech investments (Private sector) Produce and Put the innovative product on the market NOT have a solid bankable NOT generate a positive cash flow NOT have a business model to understand NOT have access to forms of finance based on collateral NOT generate interest for the banks because of the limited investment Risk High Medium Low
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How to finance tech. innovation
Venture Capital financing of business ventures in high-technology sectors in the initial phase of the business investment in risk capital for firms with high growth potential, by a specialist Venture Capitalist mechanisms to return to investors the capital collected final goal is to exit advantageous limit: considerable managerial skills of the team Business Angels non-institutional investors (eg managers) that can occur through management support and forms of direct financing to companies still in their infancy and require limited financial resources Notwithstanding a strong risk attitude, they take a limited equity capital investment in companies with high growth potential and they provide important management consulting and financial
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R&D investments as a percentage of GDP
Private sector Public sector. R&D invetsments -% over GDP- 1 2 3 4 Italy UK Canada France Germany United States Japan Sweden Both Italian private and public sector present a R&D gap when copared with other developed counties
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R&D investments: EU comparison
Svezia ,74% Finlandia 3,45% Germania 2,54% Danimarca 2,48% Austria 2,46% Francia 2,10% Belgio 1,88% Regno Unito 1,76% Olanda 1,71% Lussemburgo ,66% Slovenia 1,56% Rep. Ceca 1,55% Irlanda 1,30% Spagna 1,20% Italia ,16% Average UE 1,85% Fonte: Eurostat, Key dati 2006
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R&D investments in Italy
= % GDP Fonte: Commissione europea, Key Figures 2006, Media EU-27
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Innovation Performance comparison
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Who invests in R&D in Italy?
(million euro 2010) subjects Investment in R&D % University 4.792 33% Public and/or governamental bodies 2.565 18% Private firms and private research center 7.057 48% Non Profit Organization 186 1% TOTAL 14.600 100% In Italy private company has a very law involvment inthe R&D process and investments Fonte: Elaborazioni IPI su dati ISTAT “Indagine sui centri per l’innovazione e il trasferimento tecnologico in Italia”
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R&D distriution within firms
more than 805 of private investment in R&D is concentrated in only 3% of the firms 3% firms > 80% R&S 97% firms < 20% R&S Fonte: Elaborazioni IPI su dati ISTAT “Indagine sui centri per l’innovazione e il trasferimento tecnologico in Italia”
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How to facilitate the relationship between research center and firms
In Italy there are many actors who try to fill the gaps within the innovation value chain . These actors have to create links between the differnt subjects involved This means different organizations are seeking to bring innovation from public research to private companies, especially small and medium-through services for spin-offs and start-ups in the areas of: promoting innovation (joint lab) service quality management business plan and market analysis business management systems support the participation of venture capital support to finance investment projects Fonte: Elaborazioni IPI “Indagine sui centri per l’innovazione e il trasferimento tecnologico in Italia”
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Conclusions Sin-offs and high-tech start-ups are the best way to create value from applied reasearch and innovation diffusion. In order to favour such a process we need: Support activities (e.g.: how to incorporate a company, how to manage it, market analysis, business plan, procedure quality control, patenting) Laboratories and offices (Innovation parks) Coordination with selected partners in Italy and aborad Equity fianancing from SEED and Venture Capital Preferencial credi lines for research and innovation activities
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