Something in the Air
The final workshop of a SUII supported project looking at developing regional innovation strategies featured a presentation from Peter Wostner from the Institute of Macroeconomic Analysis and Development in Slovenia. He framed the development of innovation ecosystems as something of a collective action problem. Such problems have been defined as a situation in which all individuals would be better off cooperating but fail to do so because of conflicting interests that discourage joint action.
In the case of innovation ecosystems it may be less about conflicting interests and more about a failure to fully appreciate the longer term benefits to all of greater cooperation, or an overly short term focus on private or organisational objectives. This can apply to both private and public sector actors. In the jargon of economics this is a failure to appreciate the positive externalities of greater cooperation.
There are significant private benefits to be gained from investment in R&D and innovation more generally, but there are also many positive spillovers that can benefit all indirectly. Alongside tangible factors such a wider talent pool and supportive institutions, they include the exchange of tacit knowledge, experience and ideas. The impact of these spillovers can be hard to measure clearly and unambiguously, but in many successful clusters they are implicitly appreciated and play a key part in the location decisions of firms and individuals.
Intangible spillovers such as these were identified as long ago as the late nineteenth century by Alfred Marshall, in his consideration of industrial districts, when he observed: “The mysteries of the trade become no mysteries; but are as it were in the air”. More recent work suggests that the wider returns from R&D investment are significantly higher than the private returns and provide a strong justification for public sector involvement to help secure these benefits for the system at large.
Wostner distinguished between exploitative or incremental innovation and explorative or transformational innovation (often focussed on technology breakthroughs). Research carried out in Slovenia suggests smaller firm tend to focus more on the former with the latter mainly being undertaken by larger firms. Those involved in the latter were found to be four times more likely to be involved in collaborative ventures with other firms, universities or research institutes and that this collaboration was vital in achieving breakthroughs.
A key issue then is how do we ensure sufficient investment and other activity to develop self-reinforcing, collaborative innovation ecosystems that generate both private and social returns. How to we generate what Wostner termed a movement, where the different parts of the puzzle fit together better to ensure the whole is greater than the sum of the parts?
A clearer appreciation of the value of collaboration will help. One obvious measure is well targeted incentives which help internalise some of the social returns for private actors. What about greater collaboration between public actors? Might a more explicit
pooling of resources, sharing of objectives and collective accountability help stimulate collaboration?
This was certainly something the Auditor General reflected on in a blog looking at progress towards the objectives of the Christie Review ten years on:
“I am not convinced that public sector leaders really feel accountable for delivering change that demands different organisations work together. There is much talk of collaborative leadership. But in my discussions with public sector leaders, it’s clear that too many of them still don’t feel truly empowered or sufficiently emboldened to make the changes they think are needed to deliver Christie.
Our collective appetite for risk-taking and innovation, and how we hold public sector leaders to account, also needs to shift. If every ‘failure’ results in hostile media and political scrutiny, we will never encourage creativity, entrepreneurial thinking and risk-taking in how we deliver public services. I’m not suggesting accountability isn’t important, far from it. But we have to give our leaders the space, time and incentives to take managed risks.”
Creating and nurturing innovation ecosystems is a collective endeavour; to achieve it might require a different culture – one that is more trusting and appreciates that the benefits of actions may not be directly felt by the organisation undertaking them, may not be immediate and may be difficult to explicitly measure.
Greater collaboration is easy to sign up for in principle but it is much harder to achieve in practice; nevertheless, as the song says: “We have got to get it together – We have got to get it together now”.
By Charlie Woods, EDAS Board Member
Header image: Scottish Universities Insight Institute