0.2 21st century economic development  (Page 3/13)

The importance of public R&D activity should not be overlooked, particularly in developing new technologies. As pointed out by Porter and Stern (1999), information technology, telecommunications, weather satellites, sensors, passenger jets and many other technologies have come about from defence research. The private sector will understandably focus efforts where it can find returns, i.e. at the market, leading to greater interest in the development end of R&D. In the US for example, 70% of R&D expenditure is for Development, while 22% goes into exploratory and applied research, with the remaining 8% spent on basic research (OECD 1996).

Intellectual property

Intellectual Property Rights (IPR) represents the mechanism through which individuals and organisations aim to protect and manage their knowledge. As described by Nelson (1986) IPR has the role of balancing the public and private interests of innovation providing “ …enough private incentive to spur innovation, and enough publicness to facilitate wide use…making public those aspects of technology where the advantages of open access are greatest ”. The strength of the IPR instrument is also a challenging issue in fostering the optimal level of competition. Monopoly capitalism feared earlier in the century was broken by competition, through constant new entrants to markets and innovation itself (World Bank 1999). However, IPR is intended to present a barrier to entry, allowing monopolistic positions to be established. The accessibility of levering IPR is also an important issue as costs of protection and enforcement are a particular challenge for smaller innovative companies (DTI 2003).

While R&D expenditure is an ‘input’ of the innovation process, patents are best regarded as an ‘intermediate product’. At a macroeconomic level patent statistics generate an interesting picture of comparative productivity. Despite being by far the largest spender on R&D (42% of OECD R&D expenditure), the US produces relatively few patents compared to some of its competitors. France, Germany, Japan and the UK together create 83.6% of triadic (US, EPO and Japan patent office filed) patent families (OECD 2005). While this is an observation of the OECD, the researchers do not discuss whether this is a bias caused by attitudes of US companies towards overseas markets or whether it is simply that overseas countries need to access the significant US market.

Open innovation

Companies including leading multinationals can no longer satisfy their need for innovation internally and are therefore looking outside their own organisations for sources of innovation that will provide future growth. Traditionally, businesses used their own internal resources and capabilities to innovate, and jealously protected their results achieved in what is termed Closed Innovation . However, it has become increasingly difficult for companies to satisfy their innovation needs from internal resources. This has come about as markets become increasingly dynamic and global, disruptive technologies arrive, and opportunities require diverse multidisciplinary approaches – often involving completely new capabilities.