and propose practical reforms with the ambition of making the UK a global open innovation hub as part of the urgent task of rebalancing and growing the UK economy,
Here the term‘open innovation'refers to both the sourcing and involvement of external organisations and stakeholders in the innovation process,
Most global corporations are not under pressure either from shareholders or other stakeholders to be open for the sake of it,
but rather are expected to manage an innovation strategy that deploys openness in a sophisticated and nuanced manner.
whether this meant the government's recently-announced‘patent box'fiscal policy designed to increase the number of operations like Sandwich in the UK was busted a flush
and new employment opportunities) then the nature of these cash flows is increasingly important for government growth and economic policy.
Given that for the foreseeable future the fastest growing markets are likely to be in emerging economies such as India and China,
There is little doubt that returns to commercialisation will be centred increasingly on these economies. Does this mean that greater levels of open innovation within corporate innovation activities will see innovation investment increasingly sourced
It enables the company to process a vast number of orders at a negligible marginal cost,
but this large fixed cost is offset by a small marginal cost of using the infrastructure.
UK Public policy and open innovation occurrence of open innovation is given by a number of broader drivers of long-term change within western economies,
particularly those classed under the‘knowledge economy'.'9 Elements from the broader knowledge economy affording a greater level of open innovation would include:
The rise of a well educated workforces knowledge not confined to an elite core within major corporations,
which support the knowledge economy are supportive of open innovation practices. The evolving focuses of our universities (exemplified by the changing impact assessment guidelines)
it is also likely that open innovation within a knowledge economy will have a particular impact on certain industrial sectors some
A. and Holloway, C. 2011) A plan for growth in the knowledge economy, London: The Work Foundation, http://www. theworkfoundation. com/research/publications/publicationdetail. aspx?
These challenges of increasingly open value chains for a range of stakeholders are the focus of Chapter 3. 23 Missing an open goal?
and through the dispersal of knowledge into the broader economy by educating students who go on to work outside academia.
the better to allow maximum outflow of knowledge and innovation into the national economy. In reality, the blanket mandating of openness
The challenge for universities is to be able to make decisions regarding the balance of openness in their role between the value to business and the value to the national economy. 16 Cohen, Wesley, M.,Nelson, Richard, R.,Walsh
For the foreseeable future the fastest-growing markets are likely to be located in emerging economies such as India and China.
Equally, if returns to commercialisation activities are centred increasingly on emerging economies, then rapidly-growing domestic market organisations
and an important creator of value within the economy. Within innovation value chains its activity can be viewed as commercialisation-related the sector creates value by applying its knowledge of
Such changes may also impact negatively rganisations in the UK and therefore potentially the UK economy as a whole
if more firms within an economy do so it should, for example, result in more high performance firms. 18 Unfortunately the model of open innovation presented here potentially represents a greater win for a single large firm than for the whole economy.
Take for example, the acquisition of a UK-based SME by a large non-UK multinational. Interpreted in the context of Figures 1 (closed) and 2 (open) in Chapter 2 represents a positive opportunity for a multinational company to exploit ideas
However, this is not necessarily a gain for the SME's native national economy the innovation could perhaps have been developed further by the SME
In this way many of the firmlevel wins from an open innovation strategy represent a zero-sum game at the level of the economy
or innovation system i e. the economy will not be strengthened by more organisations pursuing more open innovation strategies.
It is far from clear that trades of such enterprises reliably capture their true value especially to national economies
which knowledge moves around our economy. In this sense open innovation is a great 21 opportunity
Correcting for a changing innovation investment landscape The UK's position as a predominantly knowledge-based economy in the UK makes its degree of investment in innovation probably its only source of enduring competitive advantage.
But do greater levels of open innovation across the economy threaten that overall level of investment?
the policy agenda must generate infrastructures that support open innovation practices at the points in global industrial innovation value chains where that approach is likely to play to the strengths of the UK economy.
The intellectual property regime Confidence in the currency of intellectual property becomes even more fundamental to economic activity in the context of open innovation securing market clarity is important here,
‘the intellectual property system must incentivise and reward inventiveness and creativity throughout the economic system rather than the current winner-takesall approach,
there is a clear case for reappraising the UK financial sectors'position in supporting the knowledge economy
when the incentive structures for developing innovations in the private sector have been unclear. 31 30 Hutton, W. and Nightingale, P. 2011) The Discouraged Economy:
But, for the knowledge economy the presence of strong business services networks are an equally important consideration.
Business Services in the Knowledge Economy',London: the Work Foundation, http://www. theworkfoundation. com/research/publications/publicationdetail. aspx?
Policy thinking must look beyond this even if open innovation is on balance a negative for our economy
and rebalance and grow the UK economy.''The Big Innovation Centre brings together some of the world's leading companies with key institutions from across the policy landscape,
ecosystems operate in different parts of our economy. It will look to map the role of open innovation activities
'in Nelson, R. R. ed.)The Rate and Direction of Economic activity, Princeton university Press, N y. Birkinshaw, J.,Bouquet, C. and Barsoux, J.-L. 2010)‘ 5 Myths
UK Public policy and open innovation Levy, C.,Sissons, A. and Holloway, C. 2011) A plan for growth in the knowledge economy, London:
the Case of the Cornish Pumping Engine',Cambridge Journal of Economics, Vol 28, pp347-363.
Business Services in the Knowledge Economy',London: The Work Foundation, http://www. theworkfoundation. com/research/publications/publicationdetail. aspx?
and to stimulate sustainable economic growth and job creation. Market failure involves a number of different factors.
These include Building the Smart Economy, 2008, and the National Recovery Plan as well as Ahead of the Curve, 2004 (Enterprise Strategy Group) and the Report of the Innovation Task force, 2010.
Understanding Economic growth, OECD,(2005) 4 Making it Happen Growing Enterprise for Ireland, Forfás, 2010 FORFÁS EVALUATION OF ENTERPRISE SUPPORTS FOR START-UPS & ENTREPRENEURSHIP 5 The Action Plan for Jobs published in 2012 places an increased emphasis on supporting indigenous start-ups.
A Cost Benefit Analysis (CBA) was conducted over a 7 year period for each of the 2005 and 2006 cohorts to establish the impact to the wider economy.
The stitutes of Te1 for 2005 a butable to a sing to trade economy. rated per an f 95-100 amb of HPSUS gen status. Highe outs from re e Action Plan nclude
The economic value of the CEB soft supports depends somewhat on the prevailing economic environment and unemployment levels.
the entrepreneurship and start-up supports examined are in alignment with Government policy and mirror practices in many innovation driven economies.
The desire to proactively develop the enterprise base to stimulate sustainable economic growth and job creation has remained also constant,
The 31 While policies such as the Smart Economy document National Recovery Plan and successive strategies of the Department of Jobs Enterprise and Innovation recognise the importance of supporting start-up activity,
or other improvements that spill over to the rest of the economy but these may not be a factor in private investment decisions;
and to stimulate sustainable economic growth and job creation. In general, companies that emanate from entrepreneurial activity are the feedstock for future employment and growth.
Financial market imperfections may be addressed by grant aid. 36 Action Plan the European Agenda for Entrepreneurship European commission, COM (2004) 37 Understanding Economic growth, OECD,(2005) 38
and Challenges Relevant Government strategies over the period of review reflect the importance of supporting start-up companies as a means to stimulate economic growth and employment.
2004, Building the Smart Economy, 2008, the Report of the Innovation Task force, 2010 and the National Recovery Plan.
These are relevant to all firms in the economy, and particularly so for start-up activity:
As an open economy that is reliant on export performance for economic growth, relative cost competitiveness comes into sharp focus for Ireland.
This echoes enterprise policy in most innovation-driven economies, particularly the US, Australia, Denmark, Finland, The netherlands and Sweden, where there is a focus on supporting high potential start-up companies. 2. 4 Evaluation
which reported in 2004 cited Internationally-traded services sector as forming an increasingly important component of trade in the economies of the more developed countries,
Enterprise Ireland's corporate strategy (2008-2010) points to the flow of innovative start-ups into The irish economy which is critical for future growth.
which ov f HPSU inves t Analysis (C from the 10 propriate ove rt. der economy rced service ormally categ t costs were g
with a knock-on effect on the benefit to the wider economy. Table 2. 12: Seven Year Benefit-to-Cost Ratios for 2005 and 2006 HPSUS Year of Entry to HPSU CBR 2005 2. 67 2006 3. 98 2. 10
and its approach also reflects international practice in innovation driven economies. The support is tailored to individual client needs
and services that can add value in the domestic economy and have potential to export.
it is however something that merits further monitoring as the programmes continues. 66 6 Enterprise Ireland Propel Programme Programme Logic Model Objectives The strategic objective of the Enterprise Ireland Propel programme is to improve the overall economy of Ireland by:
the programme providers and stakeholders to assess their views on the programme and its impacts.
The strategic objective of Propel is to improve the overall economy of Ireland by: Increasing the number
as Ireland faces very challenging economic conditions, the Government's Building the Smart Economy, 2008 discusses the importance of providing strong supports for startup companies
Building on the Smart Economy strategy, the Report of the Innovation Taskforce, 2010 states that policy and investment decisions must be centred on supporting
will be the lifeblood of The irish economy and that supporting these companies is a key objective.
Ahead of the Curve, 2004, Building Ireland's Knowledge Economy The irish Action Plan for Promoting Investment in R&d to 2010, Forfás, 2004, the National Development Plans, 1999 and 2006,
and start-ups are significant drivers of economic growth and that supporting entrepreneurs and start-ups has a key role to play in Ireland's return to sustainable growth and job creation.
and Enterprise Ireland worked with a number of stakeholders and partners in delivering this programme including the South East Business Innovation Centre,
As such collaboration with academic and/or enterprise partners is often essential to realise the full potential of innovative business ideas in terms of economic growth and job creation.
In December 2008, the Government published Building Ireland's Smart Economy A Framework for Sustainable Economic Renewal in response to the economic challenges facing Ireland.
It emphasised the importance of building the innovations or‘ideas'component of the economy through the utilisation of human capital-the knowledge,
Building on the Smart Economy strategy, the Report of the Innovation Taskforce (2010) places innovation and entrepreneurship at the heart of driving increased productivity and economic growth.
will be the lifeblood of The irish economy. Supporting these companies is a key objective for Enterprise Ireland.
Innovation is viewed as an essential element for driving economic growth and the report emphasises the strong role of entrepreneurship and the commercialisation of academic R&d in increasing innovation.
which was developed in the context of Ireland's challenging economic environment the plan emphasised the absolute need to support economic growth and stresses the importance of protecting investment in supports for enterprise and innovation for the development of the smart economy and on the key
and innovations from the higher education sector to promote economic growth, it states that we will promote
and to promote the initiative to all stakeholders. The Pilot phase was attended by 144 individuals.
This increases the likelihood that the business idea is successful and ultimately leads to increased economic growth in terms of jobs and exports.
The empirical evidence77 shows that venture-backed start-ups redefine the US economy through direct and spillover effects.
The PWC study preceded the global financial crisis and the downturn in the national economy. In assessing the impacts of the Enterprise Ireland Seed
In parallel to this enterprise strategy report, Building Ireland's Knowledge Economy The irish Action Plan for Promoting Investment in R&d to 2010 was launched in July 2004.
as Ireland faces very challenging economic conditions, the Government's Building the Smart Economy, 2008 aspires to make Ireland an innovation
Building on the Smart Economy strategy the Report of the Innovation Taskforce, 2010 states that venture capital has a particularly important role to play in high-growth enterprises.
and the absolute need to support economic growth committed to introducing the Innovation Fund Ireland86 to attract international venture capital fund managers to Ireland,
unemployment and low economic growth in Ireland. It was recognised that micro enterprises (employing 10 or less people) could be a valuable source of employment and economic growth,
and that at that time, there was a gap in the provision of state supports to those enterprises.
In some instances, individual CEBS may have set out their own targets. 9. 4 Rationale for Government Intervention The role of entrepreneurship in driving economic growth is accepted well.
Secondly, at times of high unemployment, where there are unused or underused resources in the economy, start-up activity may utilise surplus resources thereby creating additional wages, profits and tax revenues.
or other improvements that spill over to the rest of the economy and are reckoned not in private decisions;
These refunds are made at national level to the State 116 OECD. 2005, Understanding Economic growth 124 9. 5 Alignment with National Policy During the period under review,
and small and medium business play in the development of the national economy. The National Development Plan 2007-2013
will be of long term benefit to the local economy. A number of CEBS operate a Hi-Start programme
The Economic Journal, 90 (357). 1980 FORFÁS EVALUATION OF ENTERPRISE SUPPORTS FOR START-UPS & ENTREPRENEURSHIP 139 At times of high unemployment, where there are unused or underused resources in the economy,
There are significant long term benefits for the economy arising from a high level of start-ups in terms of productivity,
With the current rate of unemployment and the existence of unused resources in the economy
Grant Evaluation Methodology and Recommendations Grant employed mixed methods involving literature review, stakeholder consultations, value for money analysis,
A series of consultations were held with all stakeholders involved in rounds One and Two of the Propel programme.
Some allowance for the likely future impact of the programme was sought through assessing the business plans of the participants Stakeholders and participant consultations:
stakeholders in Graduate Enterprise Programmes including one to one interviews 152 In addition, a member of the evaluation team attended one day of the two day residential workshops and observed trainers,
but based on participant and stakeholder feedback their implementation would increase programme effectiveness; for instance, using Enterprise Ireland Technical staff to complete a Technical Assessment during Phase I of the programme.
Costs and Inflation Forfás February 2014 State Investment in Research and development 2012 2013 Forfás December 2013 Survey of Research and development in the Higher education Sector 2010/2011 Forfás
November 2005, Published in Dutch The Creative Economy: challenges and opportunities for the DC-regions, Isabelle De Voldere, Eva Janssens, Jonas Onkelinx and Leo Sleuwaegen, April 2006, Published in English Spelers uit de televisiesector getuigen:
14 2. 1. Business model innovation in SMES to sidestep the commodity trap...14 2. 2. The role of the initial business concept or vision...
the relevance of the experience economy for innovating SMES...22 2. 4. Different ways SMES can create value...
The current economic crisis has weakened the financial health of many small and medium-sized firms (SMES), especially in industries in which foreign,
Technology per se has no economic value; indeed, the economic value of technology is realized when companies develop and commercialize it through a particular business model.
In all our interviews, managers emphasized that business models play a primary role in SMES in low-and medium-tech industries, not the technology.
We also focus on the role of the experience economy as one way to create value.
we examine the different drivers that enable SMES to accomplish these major business model changes. 2. 1. Business model innovation in SMES to sidestep the commodity trap Many SMES face severe commoditization pressure in their markets.
SMES that successfully sidestepped the commodity trap have changed their existing business model successfully to deliver more value for the customer at a profit.
The economic value of a technology only emerges when it is commercialized in some way. 14 It is the business model that determines the economic value of a new technology by indicating how customer value will be created
and how the company can capture value from that technology. In contrast with other innovation reports,
the relevance of the experience economy for innovating SMES New offerings can create value for customers in different ways.
In today's service economy, many SMES wrap additional services around their products to increase customer value in exchange for a premium price.
and scope economies become the dominant driver to gain and sustain competitive advantages. As the next examples will show,
Curana is a great example that illustrates how commodities such as mudguards and other bike accessories can be used to transform bicycle riding for the end consumers into an engaging experience.
and how this move allows them to sidestep the commodity trap. We narrowed our attention in this chapter to the role of the business concept
because avoiding the commodity trap and price competition are their main concerns. Once Curana was recognized as an ODM,
and analyzes it via a set of keywords regarding how the overall concept of a patient room should be changed to deliver value for the different stakeholders involved.
Stakeholders are, in this case, the patient, nurses, doctors, family of the patient, and so on. PROF was structured in such a way that it could progress with the new concept for a patient room and stay in tune with the stakeholders.
PROF includes both a small and a large consortium. The small one consists of a well-58 selected group of architects
and think in an innovative way about a patient room that could add significant value to all the stakeholders involved.
Other companies make money using open innovation to move from commodity products to highly differentiated products.
and Quilts of Denmark successfully sidestepped the commodity trap and now capture more value by focusing on how they can offer highly differentiated products and unique experiences to the consumer.
Moving away from commodity-like products and offer highly differentiated products (or experiences) that combine the expertise of several partners,
The current economic crisis has weakened their financial health, especially in industries that are globalizing rapidly. These changing market conditions force them to look for new ways to differentiate their products
First, SMES create the majority of the jobs in these industries in Western economies. Moreover, globalization and commoditization threaten many jobs
MA. 14 The role of the business model creating economic value from technological inventions is one of the central themes in Chesbrough, H. W. 2003), Open innovation;
A discovery driven approach, Long Range Planning, 43,247-261.20 Pine, B. G. and Gilmore, J. H. 2011), The experience economy, Harvard Business Review
Pine, B. G. and Gilmore, J. H. 1998), Welcome to the experience economy, Harvard Business Review, July-August, 97-105;
The Predatory Use of Preliminary Injunctions, The Journal of Law and Economics. Vol. XLIV, no. 2, 2001,573-603) for an analysis of how smaller firms are disadvantaged disproportionately by high IP litigation costs. 37 See Chesbrough, H. 2003) Open Innovation:
they can be found across all sectors of the economy in Ireland and Northern ireland, that innovation activity is not dependent upon the presence of R&d staff
and that firms of all sizes and in all sectors of the economy can be innovative.
The new understanding of innovation in the knowledgebased economy is that commercially significant innovations are much more likely to emerge where businesses interact
UK Public Policy and Open Innovation (Big Innovation Centre, September 2011). 6 11 Ambitious and innovative SMES are disproportionately effective in stimulating economic growth
and thrive while still helping support the rest of the SME population who are the bedrock of the economy.
and entrepreneurbased economy. It is characterised by the interactions that take place between actors in the ecosystem to facilitate innovation.
Northern ireland knowledge economy baseline report 2011 (2011). 12 An innovation ecosystem exists to support an innovation and entrepreneur-based economy.
and has all the constituent parts required to enable an innovation-and entrepreneur-based economy in place,
CLEARING UP THE CONFUSION To listen to many economists, pundits and policymakers discuss the economics of growth it would be easy to be confused by the commonly used terms:
competitiveness, innovation and productivity. These terms are used often almost interchangeably and with little precise meaning.
COMPETITIVENESS With the increased globalization of the economy, the term competitiveness has become ubiquitous. But what does it actually mean?
as how an economy manages the totality of its resources and competencies to increase the prosperity of its population. 3
For example, a printing firm in Michigan that sells printed material to customers across the United states would be traded a firm from the perspective of the Michigan economy,
but a non-traded firm from the perspective of the U s. economy. In contrast, a software firm in Washington that sells software throughout the world would be traded a firm from the state and national perspective.
the term region shall refer to both national and subnational economies). But how do we define health?
but fails to control for the size of a region's traded sector economy, i e. the larger the economy the larger the impact of the value added on competitiveness.
In addition, if a region has vastly more imports even if its traded sectors are producing a large amount,
its economy is not holding its own when it comes to competitiveness. But focusing on trade deficits alone fails to account for the fact that a region might run a surplus
suppressed wages in If you listen to many economists, pundits and policymakers, it is easy to be confused by the commonly used terms:
and import blocking means that we cannot determine with certainty that the U s. economy is uncompetitive.
and Sweden would be on a list of competitive economies (they run trade surpluses while also having relatively high wages and limited discounts).
and the United states (too large a trade deficit even when accounting for foreign subsidies) would likely not make the list of competitive economies.
A COMPETITIVE ECONOMY IS ONE WITH A TRADE SURPLUS, FEW BARRIERS TO IMPORTS, AND LIMITED DISCOUNTS TO EXPORTERS.
it's important to understand that economies have three ways to grow over the medium and long term:
THE THREE SOURCES OF ECONOMIC GROWTH 2. PRODUCTIVITY IN ALL INDUSTRIES 3. GROWTH OF HIGH PRODUCTIVITY INDUSTRIES 1. GROWTH IN WORKERS The second the across-the-board growth effect occurs
when a region's productivity increases not by higher productivity industry sectors becoming a larger share of the economy,
The answer depends in part on the size of the economy and to a lesser degree on the type of sector.
The larger the economy, the more important the growth effect is since relatively lower shares of large economies'output are traded in sectors.
Moreover, the more local-serving the sector is, the greater the importance of the growth effect.
Yet, it would be a mistake to conclude that economies can ignore innovation or competitiveness.
Moreover, as highlighted in Innovation Economics: The Race for Global Advantage, a weak traded sector can have spillover effects on the overall economy,
distorting investment patterns and limiting growth8. Competitive weakness also creates a stiff headwind that other components of growth (e g.,
In fact, this competitive weakness explains many of the current problems faced by the U s. and European economies.
and STEM education) that can spur more innovation in all three major sectors of an economy (for profit,
and functions in an economy to determine the barriers to growth and the policies that can promote both the growth and shift effects.
global economy nations need to develop three distinct strategies: one for success in innovation, one for international competitiveness and one for productivity.
J. Ezell, Innovation Economics: The Race for Global Advantage (New haven: Yale university Press, 2012. http://globalinnovationrace. com/9. James Manyika et al.
He is also the author of the books Innovation Economics: The Race for Global Advantage (Yale university Press, 2012) and The Past and Future of America's Economy:
Long Waves of Innovation that Power Cycles of Growth (Edward Elgar, 2005. Dr. Atkinson received his Ph d. in City and Regional Planning from the University of north carolina at chapel hill in 1989.
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