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BUSINESS DOMINANT POSITION IN INNOVATION PROCESS
Babych T. O.,
Master of International Economic Relations;
Ukraine, Kyiv, lecturer of Department ofInternational management of Kyiv National University named after Vadym Hetman
ABSTRACT
In the international competitive environment innovative development acquires the special urgency for the nation. Innovation is no longer seen as a stochastic process. was The systematic implementation and stimulation of innovation have become the paradigm of economic development for the most of the world. It is important to form and to exploit new methodologies and tools for innovation policy. Such instruments should cover all the factors and results. So the large and small business should become the main partner for government. Globalization and sharpening of international innovation competition force business to seek new partner in the face of state, which defines the rules for the economy and is responsible for the formation of highly educated human capital. Therefore, the need to develop theoretical and methodological principles of public-private partnership defines the actuality of the study. Public-private partnership should facilitate the science, technology and innovation potential of both sides. The task of the state are forming and implementing innovative strategies that will take into account the dominant role of business in the sphere of innovations. Business, in turn, provides for its implementation available resources.
The study shows that the public-private partnership can be the most effective instrument of national innovation policy. In this work the influence of public and private institutions on the level on public innovation ratio is specified. The role of big business in the innovation process is justified. The level of importance of practice for researchers for further innovative work is analyzed. The functions of the state and business in public-private partnership are outlined. In addition, patents are often being «sleppy» for a long time. Therefore, the paper presents basic ways of solving this problem. The paper provides advice for states which are seeking to implement an effective innovative policy based on public-private partnership.
The study. The main conclusion of recent Global Innovation Index is the shorten of the gap between Third World countries and innovators in recent years. This process began when developing countries had developed and implemented national strategies of innovation and technological progress. Such strategies provide a plan of action in all areas of NIS in particular country. Typically, university education and research institutions are the core of such programs. But statistics show that business play a significant role in the development of innovative economy in most countries. Fig. 1 shows, that the share of commercial enterprises account for about 90% of all inventors received patents for their developments. So the question arise: how much effective can be the government policies which stimulate innovation by funding research universities and government agencies, if the overwhelming majority of patents belong to specialists from commercial sector. Is the government support of innovative infrastructure and atmosphere in the country it still the function of country if we want to create highly educated human capital who would be potentially capable to invent?
Furthermore, experts suggest that bright and innovative ideas arise mainly among the creative, innovation-minded and motivated professionals and scientists. It is considered that such people often work in the medium or small companies. However, statistics shows a completely different picture (see Fig. 2).
ARTICLE INFO
Received 18 November 2015 Accepted 11 December 2015 Published 30 December 2015
KEYWORDS
innovations, business, small business, big business,
public-private partnership, national innovation policy, patents.
© 2015 The Author.
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100 90 80 70 60 50 40 30 20 10 0
0 8 2 3.2 o ' 0 7
1 1 1 1 1 1
Business
Private research institutes
Public research institutes
Universities
National research institutes
Others
Fig. 1. Percentage of researchers who received patents, by type of institution, in 2007, EU countries
Source: composed by the author according to [5]
80 70 60 50 40 30 20 10 0
A
y
y
/
/
/
y y
S — ^^—
Biij business
Medium business
Small business
Fig. 2. Percentage of researchers who received patents, by type of institution, in 2007, EU countries
Source: composed by the author according to [5]
As we can see, the percentage of patents obtained by large business almost five times bigger than the percentage of small and medium-sized business all together. Large business allows inventors all necessary for creative work things due to accumulating a significant amount of capital and investing it in development and research. According to a poll among researchers from Europe [5], the most significant awards for innovators are: growth of the employer's business efficiency, practical use of research results, being a part of the particular popular innovative company, money incentives.
Analyze of the six main sources of information available to researchers adds new bonuses to big business in comparison with public sector and universities. As seen in Figure 3, the majority of patent holders argue that the main source of their knowledge and ideas is a direct communication with clients or participation in the production process. The usefulness of universities' and public research laboratories' scientific works and research results appears to be extremely low. The main reason: universities researchers are far from the realities of the market.
Professor Eric von Hippel [2, 3, 6] emphasized on the importance of the needs of customers and consumers for implementing innovation even earlier. His theory of Customers as Innovators serves as a vivid proof of the fact that new ideas arise when consumer is not fully satisfied with a specific product or service. So customer tries to improve it with available tools. If a customer modified product achieves a greater utility for a large number of consumers, manufacturers would be interested in manufacturing it. There are situations when the client is aware of not satisfied needs, but does not have sufficient knowledge to improve the product by himself. The idea or the requirement to the product or service arises, but the implementation doesn't occur. We suggest that gathering such information from consumers and customers must become the main task of marketing departments. Accumulation of these knowledge greatly increases the chances of the company to create innovation. In addition, the popularity of customer's innovative products is forecasted, since they had declared this need by themselves. Universities can offer services in processing and analysis of information collected by commercial enterprises. Therefore, the cooperation between public universities and large commercial companies is a necessary condition of the successful national innovation police.
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Fig. 3. The average important of six sources of information for innovation process.
Source: composed by the author according to [5]
A significant share of the patents obtained in the country remains "sleepy". We should take this fact into account when developing the national innovation programs. As seen in the Figure 4, approximately 20% of all inventions finds no practical use. Universities' patents stay "sleepy" almost twice as likely patents owned by large companies. There are two reasons: the patent does not meet the needs of market, or the content of universities' and public institutions' research is not scientific innovation, and such researches are conducted thanks to public funding provided by state development programs. Of course, efficiency of such public investments is low. Cooperation with commercial companies in the scientific and research activity will increase the return on invested funds.
GO 50 40 30 20 10 0
50
Big business
35,1
-4+T+-
Private research istitutes
Public research institutes
Universities
□Internal use
■Licensing
□Doi mailt patents
Fig. 4. Patent useage by their owners, in 2007, EUcountries. Source: composed by the author according to [5]
Public-private partnership programs such as the Small Business Innovation Research program (SBIR) and NIST's Advanced Technology Program (ATP), which had became the main source of capital for new innovative companies in the US, are effective solution of this problem. Such programs give us a ability to bring together small and large companies, universities. It makes possible the development in partnership new high-tech products such as amorphous silicon detectors, which are widely used in lab medical tests [7].
SBIR invests about 2.5 billion dollars per year in a potentially effective R&D produced by small business. Such aid consists of grants and contracts for supplying new technologies. In comparison, private venture funds invested only 919 million dollars in the start-ups in 2011. Eleven federal agencies are obliged by law to invest 2.5% of their annual budgets to SBIR fund [1]. So innovative small business can easy get investments.
Fred Block and Matthew Keller [4], relying on the R&D Magazine database, which includes information about the best inventions for the past 40 years, found that over the past two decades about two-thirds of top innovation programs had been funded by public-private partnerships. But the best 30 or 40-year-old inventions mainly were financed apart by private or public funds. Their research also revealed that up to 25% of the most successful R&D in the US had received grants from the SBIR [4].
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25
21 LL LL
13
ft 11
4
1
1982 1984 1988 1991 1995 1997 2002 2004 2006
Fig. 5. Percentage of the most successful R&D in the US, which received funding from the SBIR Source: composed by the author according to [4]
These findings are useful during new national innovation programs are working out. First, we need to stop overestimating the role of universities and public research institutions in innovation process. Second, we must find ways of cooperation and collaboration with large business in research and educational activities. Such cooperation enables both large business and nation to get positive effect. The government saves budget. Also budget-funding programs become more effective because they began to concentrate on solving the really important problems of innovation process. In turn, large business participating in such programs gives them an access to educational police. Private sector gets the possibility to predetermine the competence of students. So they can save money on retraining new staff. Taking into account the needs and requirements that are imposed by large commercial enterprises to job applicants, in the preparation of school and university curricula greatly reduces the cost of business to adapt to the realities of young workers market. Graduates increase their competitiveness in the labor market. As a result, the nation receives highly competitive and well-educated human capital. Created by large business innovation infrastructure not only increases the investment attractiveness of the country, but also provides innovative benefits such as primary consideration of their business interests.
REFERENCES
1. Charles W. Wessner, Alan Wm. Wolff. Rising to the Challenge: U.S. Innovation Policy for the Global Economy Committee on Comparative National Innovation Policies: Best Practice for the 21st Century // Board on Science, Technology, and Economic Policy Policy and Global Affairs, The National Academies Press Washington DC. - p. 573 - ISBN 13: 978-0-309-25551-6, ISBN 10: 0-309-25551.
2. E. von Hippel. Economics of Product Development by Users: The Impact of "Sticky" Local Information // Management Science. - 1998. - vol. 44, No. 5 (May). - p. 629-644.
3. E. von Hippel. The dominant role of users in the scientific instrument innovation process // Research Policy. - 1976. - № 5(3). - p. 212-239.
4. Fred Block, Matthew R. Keller. Where Do Innovations Come From? Transformations in the U.S. National Innovation System, 1970-2006, // Washington, DC: The Information Technology and Innovation Foundation. - July 2008.
5. Mariani Giuri. Inventors and invention processes in Europe: Results from the PatVal-EU survey // The PatVal-EU survey. - Research Policy, October 2007.
6. P. Oliveira, E. von Hippel. Users as Service Innovators: The Case of Banking Services // Research Paper. - MIT Sloan School of Management, October 20, 2009.
7. The Advanced Technology Program, Assessing Outcomes. - National Academy Press. -National Research Council, Washington, DC, 2001.
8. 2015 Global Innovation Index. Effective Innovation Policies for Devepopment. - London, United Kindom, September 17, 2015.
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