1. 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

2. 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

3. Innovation= value creation

4. 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)

5. 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)

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. R&D investments in Italy= %
GDP
Fonte: Commissione europea, Key Figures 2006, Media EU-27

13. Innovation Performance comparison

14. 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”

15. 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”

16. 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”

17. 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