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DOI: 10.1177/097172189600100104
1996 1: 51 Science Technology Society
Stephen C. Hill
Globalism of Technology
Opportunity as Developing Countries from the New
Small Player Advantage in a New Game: Capturing
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Small
Player Advantage
in a New Game:
Capturing Opportunity
as
Developing
Countries
from
the New
Globalism
of Technology
STEPHEN C. HILL
Stephen
C. Hill is
Director,
UNESCO
Regional Office—Jakarta,
J.L.M.H. Thamsin
14,
Tromolpos
1273/JKT, Jakarta, 10012,
Indonesia.
As the world moves towards the
twenty-first century, developing
nations are
confronted
with a
complex
and
challenging paradigmatic shift
in the
way
that
technological
process
is
becoming
embedded in the
globalised
economic
framework of develop-
ment. There is a
perceptible shift taking place from
economic
power being
derived
from nationally
owned
production facilities
to economic
power being
derived
from
the national location
of high
value-added activities.
As
developing
countries are
opening up,
there is a
greater incidence,
than ever
before,
to
transfer
advanced
technological processes
and know-how to the
developing
partners
as a
part of
the
global networking strategies.
As
opposed
to the earlier
strategies,
these new
networking strategies
seek to
encourage
establishment
of locally
based
research,
development
and
design facilities
to meet both the local and inter-
ndtional demand
for increasingly sophisticated spectrum of products. Developing
nations stand to
capture
and
gain from
these
advantages provided
their structures are
equipped
to bed these new
knowledge capacities
into their national
technology
strategies.
There is a series
of
various
factor advantages
behind these new demands
of
economic
competition.
At the heart
of capturing
value-added
advantage from
the new economic and
technological
order lies the whole
spectrum of reordering
the S&T skill base
including
the educational
system
which seeks to
develop
more
strategically informed
inter- and
multidisciplinary
S&T
programmes. Entirely different principles of
science and
technology policies
are
implied
which
focus
on the
development
and
flow of people
embedding
national SBcT advance into
aligned
social and
organisational strategies.
What is the role of a nation within the
emerging global economy,
in
which borders are
ceasing
to exist? Rather than increase the
profitability
of
corporations flying
the
flag,
or
enlarge
the worldwide
holdings
of its
citizens,
a nations economic role is to
improve
its citizens standard of
living by enhancing
the value of what
they
contribute to the world
at TOURO COLLEGE LIBRARY on July 4, 2014 sts.sagepub.com Downloaded from
52
economy.
The concern over national
competitiveness
is often
misplaced.
It is not what we own that
counts;
it is what we do.
Robert Reich
(1991)
UNDERLYING THIS CONCLUSION
by
Robert Reich is a
paradigm
shift
in the
way
that
technology
is understood to relate to economic
development
as the world moves towards the
twenty-first century.
This is a shift from economic
power being
derived from
nationally
owned
production
facilities to economic
power being
derived from
the national location of
high
value-added activities.2 It
is,
of
course,
difficult to refute the fact that national and concentrated owner-
ship
has remained
significant
in
global
economic affairs.
Within the
global economy,
a small number of multinational
corporations (MNCs) persist
in their dominance of the world
economy
and in their
ability
to
capture
the
leading edge
of scientific
and
technological change
and to translate this into economic
advantage.
This is
particularly
the case in research intensive
high
technology
activities. The
OECD,
for
example,
estimated that
(based
on 1987
data)
the
top
ten firms in
computers
contributed 90
per
cent of the world
output;
85
per
cent in
telecommunications;
and 61
per
cent in semiconductors. In automobiles the
top
seven
firms contributed 88
per
cent of
global output;
and in
tyres,
the
top
six firms contributed 88
per
cent
(OECD 1992).
Within the elec-
tronics and information
technology industry,
there is considerable
concentration both of
ownership
and national base with seven
MNCs
(all Japan based) dominating
two or more of the
compon-
ents, computers
and consumer electronics sectors
(in 1989-90);
with
Japan,
the United States and
Europe dominating
all
top
ten
companies
in each of these
sectors,
the
singular exception being
Korea which has now raised
Samsung
and Gold Star to ninth and
tenth
positions
on the consumer electronics list
(CEC 1991).
However,
in
spite
of these statistics of national
dominance,
new
trends are
emerging
in the
way
that MNCs have found it
profitable
to
operate.
Until
recently,
the less
developed
economies had
pur-
chased
high
value-added
goods
from a few
technologically
elite
countries and the 1vlNCs that
represented
them.
Aligned
with this
same valence of
power, global corporations
were
competitively
successful
by breaking up
the
production process intemationally-
maintaining high
value-added activities close to their home base
and
garnering
the
cheapest
labour for low value-added fabrication
activities from the most
compliant
and least
wealthy developing
&squf;
53
countries. This was a
strategy
based on the mercantilist
ownership
view of
technology
and economic
advantage.
For the
developing
country,
the
strategy provided
a Faustian
bargain:
immediate
employment
and economic
wealth, but,
without the nations
ability
to
capture
the
technological capability
and
knowledge;
in other
words, only
a short-term
advantage.
As wealth
increased,
the
labour costs of less
wealthy
countries attracted the MNCs
away
from Taiwan to
Malaysia
and Thailand to China and Vietnam.
Developing
countries have
captured
little of the
technological
value-added
capability
of the
MNCs,
as this was never transferred
in the first
place.
However,
the
globalisation
of
integrating technological
know-
how into
production
has been
eroding nationally
based
competitive
advantage.
Until about ten
years ago, vertically integrated
MNCs
dominated the introduction of new
technology (Sony
and
Philips
in the case of
compact disks). Increasingly today, global
networks
interlink
corporations
in the
production
of a
single product.
In the
aircraft
industry,
for
example, Boeing, despite
its
reputation
as an
American
company, produces only
15
per
cent of the
components
that make
up
its aircraft in the United States. In
fact,
the United
States
only provides
the
assembly
site,
and the
company
acts as a
production manager
for what is
essentially
a
globally produced
aircraft.
Thus,
components
for
Boeing
are manufactured
in,
for
example,
both Indonesia and Australia under
competitive
contracts
(Hill
et al.
1994). Consequently,
as Michael Porter
observed,
with
activities and
responsibilities spread
across
many parts
of the
world,
the traditional notion of a
single powerful
centre of
corporate
control is no
longer
accurate
(Porter
1990:
53-54).
Japanese
firms,
faced with intense domestic
competition
and a
restructuring
of their
economy,
have been leaders in this
trend,
seeking
over the last few
years
to establish
strategic
control of the
Asian market
through regional
networks for the
production
of
high
value-added
goods.
A
major
shift in cross-national transfers of
mobile
capital
resulted,
with
Japan
and
Japanese
MNCs
providing
the lead as the
major
source. The networks involve new forms of
linkage
between firms:
joint
ventures,
subcontracting, licensing,
cooperative
research
agreements
and second
sourcing.
The result
is that
many
firms are now involved in a
complex
web of
agree-
ments in
many
of their main areas of
operation-research, produc-
tion and
marketing.3
54
The
networking strategy
involves transfer of advanced tech-
nology
and know-how to the less
developed partner,
a
potentially
high
risk
strategy
as it accelerates the
development
of
possible
competitors.
Yet,
the
strategy
is
necessary
to
gain
local
competitive
advantage by compressing
and
speeding up
the traditional com-
mercialisation
process. Speed
in
knowledge
transfer to remote
production
facilities is fundamental to the new
global competitive-
ness.
Survival,
in the
long-term,
now
requires
the
capability
to
deliver
high quality,
small batch
products
customised to local
needs.
Giving away technological
know-how and
nurturing
of
offshore technical skills are essential elements of this
strategy.
The
corporation
remains ahead of
competition simply by being
faster
on its feet rather than
by locking up
its
technological
secrets in an
intellectual
property
vault,
particularly
in
leading edge
industries.
As
opposed
to the
previous
national
ownership
centred
strategy,
the 1990s
global networking strategy
should
encourage
the estab-
lishment of
locally
based
research,
development
and
design
facilities
to meet the local demand for
increasingly sophisticated products.
Developing
nations
will, however,
capture
this
advantage only
if
they
are
equipped
to weave these
knowledge enhancing capabilities
into their national
technology strategies.
The New Small
Player Advantage
There is a series of
technological
and cultural factor
advantages
behind these new demands of economic
competition.
For
developing
nations to
capture
the
butterfly
of
globalised technological
know-
ledge
it is
important
that their
technology strategies encompass
both these
technological
and socio-cultural factors.
Key ingredients
in the
development
of the new
global competitiveness
formula are:
l. A shift in
process technologies
from mechanical to electronic
control has allowed the
competitiveness-
of
complex
non-
standardised
production
to
supersede
the
prior advantage
of
standardised mass
production.
2. In
parallel,
consumer
preferences
have shifted towards a
more
specialised
and customised demand.
3. Communications and information flows have
changed.
Advances in information
technology
allow
highly specific
55
and
timely linkage
between
production
demands of
large
companies
and small
supplier capabilities:
fax and other
electronic communication close the
physical
distance/time
gap
between the firm and its customers.
4. The
complexity
of
required
information ensures that flat and
small
organisational
structures
perform
more
flexibly
and
responsively
than
large corporations.
The
key
to customised market sensitive
technologically sophis-
ticated
competitive advantage
in the 1990s is
responsiveness.
Responsiveness requires
both well
developed technological
and
social
capabilities.
In this
context,
corporations
have to be able to
move fast-to sense new market
opportunities
and
strategic
inven-
tions and innovations
early
and address the market
by putting
emerging technologies
into
production very rapidly.
In the
computer
industry,
for
example,
the window of
opportunity
for
many pro-
ducts is
likely
to be three months wide and two
years
ahead of
current
production;
meanwhile the obsolescence rate of current
software and hardware skills is
likely
to be
approximately
two to
three,
and four to five
years, respectively.
Hewlett-Packard,
for
example,
earns two-thirds of its revenue from
products developed
in the last two to three
years.
Small
companies,
able to avoid the
retarding
effects of size and
institutional
inertia,
have been able to
capitalise
on the
advantages
of
innovating rapidly.
In
spite
of the assumed economies of scale in
the last
global
era,
small
companies
were,
like
mosquitoes
on a
balmy evening, beginning
to cause considerable irritation to estab-
lished business
practice-in
some
cases,
threatening
the
giants
very
existence. For
example,
two small
computer companies,
SUN
and MIPS in the United States
put
the
giant
IBM under
siege
following
the
development
and diffusion of RISC
(Reduced
Instruc-
tion Set
Computes) through
extensive
licensing agreements
and
cooperation
with
programmers
and
producers
who otherwise would
be
competitors.&dquo;
IBM in this case resisted the
development
of
RISC even
though
it had been involved in the
early development
of the
technology.
RISC,
applied particularly
in
computer
work
stations,
isolates core
processing
from
peripheral processing, using
software to fulfil
peripheral
tasks
previously
handled
by
hardware.
For IBM far too much was at stake in
initiating
a move into RISC
from
potential competition
with its
previous
mainline
products.
56
The
competitive edge
of SUN and MIPS came as much however
from a social innovation as from
technological ingenuity,
from
breaking
the normal
competitive
rules.
They gave away
licences
to
others,
creating
a
swarming
effect around an
emergent design.
The exercise of
tight ownership
control
simply
does not work
any
more in these
rapidly moving high
tech areas.
SONY,
to its detri-
ment,
learnt this when it failed to hold onto the video market
through
its
strategy
of
restricting
access
by
others to the
companys
Beta
design.
The most basic reason
why
control
through ownership
does not work is the nature of
technological change
itself. Tech-
nological
advance in
leading edge
industries is
immensely complex
and
rapid.
New, perhaps relatively small,
technological
innovations
can
sweep
from
side-field,
or from other areas of the market
place
to eliminate the
competitive advantage
of dominant
players,
as was the case with both IBM and SONY.
Large pace setting companies
have
responded structurally by
moving
towards the more
open global
networks noted
earlier,
where the
corporations selectively
share
control,
technology
and
markets with
organisations beyond
their formal structure. Small
firms can nest into these
open
structures and
provide
the
responsive
speed
that
todays
more customised demand
requires
and which
larger organisations
cannot deliver. Some
large companies,
such as
the electronics
giant Kyocera
of
Japan,
have themselves
sought
to
transform into networks or clusters of small
organisations;
the
production department
of
Kyocera
has been restructured into 200
self-managing
and
financing
teams or
amoebae,
as
they
are
called,
which
change
their
shape
and size
according
to demand. For the
small
responsive
firm,
cooperative arrangements
with other firms
create a new and sustainable
organisational ecology (Mathews
1992). By entering
into contractual relations with each
other,
creating
an internal
quasi-market, they
eliminate the need for
top-
down
production scheduling
and achieve an
extraordinary high
level of
flexibility.
An
example
of such small
company clustering
is
an Australian
group,
Technical and
Computer Graphics (TCG):
TCG is a small
group
of 24
companies
based in
Sydney. They
collectively
have a staff of 200 and a turnover of
$(A)
43
million. This network or cluster of
companies
has
grown rapidly
to become the
largest privately
owned
computer
services
oper-
ation in Australia. TCG has
perfected
a form of commercial
contracting
between members of the
group,
and of
product
57
development
that make them
extremely
flexible and
responsive
to market demands and
changes.
Because their basic structure
consists of small
highly
motivated
companies they
have been
able to be
highly
innovative while
maintaining
a low cost
structure.9
In
Australia,
a
very
small
player
in the
global economy,
recent
data demonstrate that the
leading edge
of the national value-
added
export
drive is commanded
by
700 small and medium-sized
companies (SMEs).
The same SME trend is observed in the
United
Kingdom,
the United
States,
a number of
European
countries
and
Japan (Sengenberger
et al.
1990). Moving
further into
Asia,
SME
strategies
lie at the core of the
powerful
arc of Chinese
business influence
throughout
the entire
region, particularly origi-
nating
from Taiwan where the SME
strategy
is
conscious,
and
supported by public
R&D
organisations
with the
express purpose
of
spinning
off small industries while
facilitating
the transfer and
assimilation of advanced
technologies
across ten
targeted
industries
from semiconductors to health care
(Wade
1990:
107-108).
Further-
more,
across Asian countries
(both
the
tigers
and the
developing
countries)
SMEs
play a highly significant
role in national economic
wealth: in
Indonesia,
for
example,
in
spite
of the
apparent
dominance
of the
large conglomerates,
much of the real
manufacturing
innov-
ation that is
driving
the Indonesian
economy
to consistent
high
growth
levels is
produced by
small to medium-sized firms.&dquo; The
global
market
place
and
aligned corporate strategies
are therefore
undergoing
radical
change
as we
approach
the
The successful business culture of the 1990s is one that can reach
sensitively
and
deeply
into
global
markets for the
particular
niche
the firm can
service,
and can
rapidly capture
and
exploit
the
knowledge
that is needed to
produce
the
appropriately
tailored
and
quality product
on time. Central to success is the efficient
linkages
that
expedite
these
rapid knowledge
flows,
and innovative-
ness to use both technical and social information most
effectively.
The New
Technological
and Scientific Orders
It is critical to realise that to
capture advantage
of these
global
changes
necessitates a clear-cut assessment of what
technology
and
technology
transfer is. Under the
previous
mercantilist economic
58
regime
of
thought
where
ownership
of embodied
knowledge
ruled
competitiveness,
the
assumption
was that
was
basically
to do with
capture
and control of codified scientific
and
engineering knowledge.
Such a view does not work
any
more
when the economic
competitive edge
lies
increasingly
close to the
production
of
complex
multifaceted
technological knowledge.
Technology
is
by
definition,
humanly
derived
knowledge,
accord-
ing
to the
original
Greek
definition;
it
literally
means words of
knowledge
about the
practical
arts. Most
importantly,
the cultural
roots of the Greek
meaning
are
deeply planted
in ancient Greek
society
which
emphasised
human
engagement
in a world that the
people
craft,
transform and
gain knowledge
about
(Hill
1988:
37-38).
Until
recently,
the critical
importance
of the human side of
technical
knowledge
was not
adequately appreciated.
What is
happening
in business
practice
in the 1990s is a
rediscovery
of the
critical
significance
of human
engagement
in
technology develop-
ment and transfers. It is clear that
technology
is
complex,
multi-
dimensional and
specific
to a
particular
firm. A
large part
of
is tacit
(that
is,
uncodifiable) knowledge
that derives from
trial,
error and
learning,
rather than from the
systematic application
of science based
knowledge. Technological
development
is therefore cumulative in
nature,
derived from
learning by doing,
whilst search is localised
(Sharp
and Pavitt
1993:
130). People
and their skills are at the heart of
transfer;
efficient social
organisation
to
capture
technical
knowledge
at the
local firm level and
rapidly
relate it to social demand is
equally
important.
Capturing technological advantage
over the last ten
years
has
also been set
against
a
very slippery slope
of
change
in the nature
of scientific
knowledge
itself. Under the stimulation of a market
place
that has been
increasingly striving
toward
leading edge
scien-
tific
breakthrough,
the
way
that scientific
knowledge
is constituted
has been
moving very rapidly indeed,
not
only
in
pace,
but more
fundamentally,
in kind. The
driving dynamic
at the forefront of
new scientific
knowledge today
is what could be described as a
multi-type complexity.
This
implies
that not
only
more than one
scientific
discipline
is involved in
problem
solutions but also
different kinds of
knowledge,
both
explicit
and
tacit;
for
example,
concerning production
or market
parameters, knowing
how to
laterally
connect ideas from other fields and discourses. In
many
&squf;
59
leading edge
scientific fields it is
relatively meaningless
to distin-
guish
between basic and
applied
research,
as the basic research
problem
is set within industrial
application
interests and
parameters
(such
as in
biotechnology
and
electronics).12
In the
successfully
innovative small
firm,
the
tailoring
of
a range
of
complex
know-
ledge inputs
to
specific
needs and the
rapid
undistorted translation
of
messages
is of crucial
importance: advantage
lies therefore in
immediacy
of relations and communication. At the forefront of
scientific
enterprise,
because of the
multi-type complexity
of
knowledge,
the same
dynamic appears
to
increasingly apply.
A
number of
ways
in which this
dynamic
is revealed
may
be summar-
ised as follows
1.
Disciplines appear
to have
increasingly
less relevance in
driving
research fields. The
majority
of research is now
published
across
disciplinary
boundaries. For
example,
an
examination of Australian research
outputs,
as recorded in
ISI listed
journal entries,
revealed that 65
per
cent of
physics
and earth sciences
department
research is
published
outside
of the fields of
physics
and earth
sciences;
77
per
cent of
information science is
published
outside the field of inform-
ation
science;
and 56
per
cent of mathematicians
publish
in
non-mathematics
journals (Bourke
and Butler
1993).
Similar
results were observed in a
university system-wide survey
of
all
publication outputs
for 1991 in Australia conducted
by
the Centre for Research
Policy:
for
example, psychology
publications
were
spread
across 49
disciplinary
fields,
clinical
sciences across
43,
and
biological
sciences across 38 other
fields of research. 14
2.
Furthermore,
there are 880 research centres
throughout
the
Australian
university system,
most of them
quite
real--in
terms of
staffing
and external finance
indicators,
a
large
number of them recent
(56 per cent being
established over
the last four
years),
and
by
far the
majority
are
multidiscipli-
nary. Collectively,
research centres account for at least 50
per
cent off Australias
tertiary
education research.S
3. Personal networks and immediate
personal
relations
appear
to be of crucial
importance
at the
leading edge
of new
fields-which,
as
with,
for
example,
membrane
technology
or
intelligent
materials, emerge
and dissolve
through
network
60
relations rather as do
self-organising systems
described in
chaos
theory.
Networks and
speed
of communication are
interlinked: the
dynamic
force behind
computer
science
research
is,
for
example,
network
membership
and
perform-
ance,
not
publication;
turnaround time for new ideas and
data in one international network we
tapped
was 10 minutes.
Physics
has
developed
a series of electronic bulletin boards
(such
as
HEP-TH, high energy physics-theory)
as the
primary
means of immediate
(and non-referred)
communi-
cation of results
(Taubes
1993:
1247-48). Speed
and networks
are
self-reinforcing.
The
complexity
of
required knowledge
inputs
is dealt with
through multidisciplinary teams,
the
success of which is
likely
to be associated with
relatively
small
size-five to twelve members
(see
Martin
1990;
Johnston
et al.
1993).
Woven
right through
this
patchwork quilt
of
observations is the critical
importance
of communication
immediacy.
The
impact
of communication
immediacy
is that where
leading
edge
research is
successfully joined
to innovative
enterprise
the
game
is rather more that of a basketball match than a
relay
race as Michael
Gibbons,
Director of Sussex
Universitys
Science
Policy
Research Unit has observed.l6 In other
words,
the traditional
view of the
application
of
knowledge
has been that basic research
could lead to
applied
research,
thence
development
and economic
wealth,
the idea
being passed
on as it were like a baton in a
relay
race. The new order involves
many
actors, researchers, firms,
universities,
governments
and so
on;
basic research is often a
product
of
highly
focused
applied
research rather
than
the other
way
around,
and most
leading edge
research is
likely
to be team
based and
multidisciplinary.
In the new order the
key
is
networking
and
immediacy-being
there!1
Capturing
the
Key Dynamics
of
Competitive Technological Advantage
into S&T Policies of
Developing
Countries
The 1990s have heralded a new order in national economic and
technological competition.
The S&T
policies
of
developing
nations
61
must take this
emerging
order into account in order to
capitalise
on the
dynamic
economic
growth
that the 1980s have delivered for
them.
Consequently,
whilst
many
national
governments
look to-
wards success of the
tigers
of
Asia,
or
Dynamic
Asian Economies
as OECD terms
them,
these are lessons of the
past,
not
necessarily
of the future. In the context of current
global change, looking
back
at the
principles
that nurtured the
growth
of Asias
tigers
and
seeking
to emulate these
principles
further-in either the
tigers
themselves or in
developing
countries of the
region-is likely
to
spell
doom for these nations as
they
slide
increasingly
backwards
in the economic world of the
The world has
changed.
Some
key principles
to be
incorporated
in the S&T
policy
in the 1990s are discussed in the
following.
Combined
Technological
and Social
Capability
At the heart of
capturing
value-added
advantage
from the new
economic and
technological
order lies the
upgradation
of scientific
and
technological
skill. This is basic to the S&T
development
strategies
of
many developing
countries,
particularly
Asia. What
tends to be
missing,
however,
is the
linking
of
technological
skill
with social and
organisational
skill.
Developing
nations, therefore,
would do well to look
critically
at their education
systems
and
strive to
develop
more
socially
informed,
multidisciplinary
and
team based S&T
programmes.
In
parallel
it should also be
recog-
nised that across
many developing
countries,
while there
may
be
currently major
efforts
being
devoted to human resource devel-
opment
in new areas of science and
technology,
often the infra-
structure
support
for the work of these
people
is still
seriously
lacking.
Even
large
investments of finance into research
projects
in
high
tech industrial areas will fail if the institutions cannot
adequately
absorb them. In
my
own
experience,
what looks on the
surface like
leading edge high technology
research can often in
practice
be
something
else.
Biotechnology
is a case in
point.
In
Asian
countries,
with which I am
familiar, biotechnology
research
often rests in
agriculturally-oriented programmes
and
interests,
though
in rhetoric the research is
targeted
towards new
high
tech-
nology industry objectives.
The reason is that the institutions and
the research cultures have not
changed. Building
new
strengths,
62
therefore,
implies building
institutional
capabilities,
teams and
organisational
cultures,
not
just training people (Hill 1992).
Articulating
National and Firm Level Innovation
Systems
Futhermore, building
national innovation
strength requires
arti-
culating
the broader innovation and
regulatory system effectively
with
private
sector
needs, ensuring two-way
flow of
people
and
knowledge
between
sectors,
and infrastructure
support
that is
targeted
to
providing appropriate background support
for industrial
innovation. As Chris Freeman
(1987:3)
observed,
The rate of
technical
change
in
any country
and the effectiveness of
companies
in world
competition ... depend upon
the
way
in which available
resources are
managed
and
organised
both at
enterprise
and at the
national level.
Sharp
and Galimberti
(1993: 65), following
Free-
mans
(1987)
work to
explore
the
specific
case of
European
bio-
technology companies,
reached the same conclusion about the
interdependence
of firm based
system
and national
system:
The
dowelopment
of
biotechnology,
for
example, required
a
closeness of
relationship
between the
development/production
activities and
regulating
institutions and bodies outside the firm.
As
long
as this closeness existed
as,
for
example,
between ICI
and the academic base in the
UK,
diffusion
proceeded steadily.
When such a
relationship
could not
exist,
or when
relationships
broke
down,
as
happened,
for
example,
with
Bayer
and Ciba
Geigy
and the
regulatory
framework in
Germany
and Switzer-
land,
then we see the
companies moving
R&D and
production
activities abroad.
Setting priorities
for scarce R&D resources to
support industry (as
distinct from
transferring
commercialisable
technology to industry)
is
important;
so also is
paying
attention to
bridging
the boundaries
between institutional structures within the overall national innov-
ation
system.&dquo;
It should be remembered here that the solutions
most
appropriate
to one
developing country may
not
necessarily
be
applicable
to others. The
development
of
linkages, crossing
institutional
boundaries,
social
innovation,
etc. are all cultural
processes. They
must be
grown; they
cannot lJe
transplanted
from
an alien cultural environment.
&squf; 63
Personal
Mobility
and Networks
In
building
an articulated
public/private
sector innovation
system,
it must be reiterated that one cannot assume
any
more that transfers
of embodied
technology
will be effective as the
primary
vehicle of
technological upgrading
of economic
growth.
What is
important
in
the 1990s is the transfer of both the embodied
technological
know-
ledge-in machines, artefacts,
and so
on,
plus
the transfer of
uncodified
capability-in peoples
tacit
knowledge
about the tech-
nologies
as well as the social means
by
which
they
can be
captured.
There is
strong
international evidence that transfers between
public
sector research and
private enterprise
commercialisation of this
research are also led
by
this same
dynamic-the
movement of
people
and the establishment of broad
ranging personal
networks.
A recent
survey by
Richard
Nelson,
for
example,
of R&D Directors
of more than 600 US industrial
companies
demonstrated that
three-quarters
of the most
important
contributions of academic
research to
technological development
were in the form of uncodi-
fied
knowledge
and skill
transfers,
and
only one-quarter
in the
form of codified
(or tacit) knowledge,
that
is,
patents,
machines,
research
papers,
etc. While codified
knowledge
transfers tended to
come from more
applied disciplines
such as
computer
science,
materials science or
metallurgy,
and were
applied
in
very
few
industries,
the useful uncodified
knowledge
and skills came from a
wider
range
of
disciplines
and had a much broader
impact (Nelson
1987). Similarly, gaining
access to
leading edge
science follows the
same
dynamic: standing
at a distance and
depending
on the liter-
ature is a
recipe
for obsolescence. The
game
is now about im-
mediacy
and
personal
networks. What matters is the movement of
people,
for it is
through
this
personal mobility
that there will be
leakages
of
public
benefits across national
boundaries;
with the
right capturing mechanisms, any country
can therefore free-ride
on the advances in research made
by
others.
Consequently,
at all
levels,
technological strategies
of
developing
nations need to
emphasise
the movement of
people
and the devel-
opment
of networks-across national boundaries in both scientific
and
technological ventures,
and
nationally,
in relations between
public
sector
research
and
private
sector commercialisation. Our
work in Australia demonstrates
clearly
that to build liaison or
commercialisation structures to
bridge public
and
private
sectors,
64
will,
if used as the basis for
driving
rather than
supporting personal
relations,
simply get
in the
way.~
It follows also that
developing
nations
may
view brain drain of their
key
S&T
personnel
from a
new
angle.
While in laboratories and
companies
close to the heart-
land of new S&T
frontiers,
these
people
could be of enormous
value to transfers of
knowledge
back to the home
developing
country. Perhaps,
rather than
making
efforts to lure such
people
back home
permanently, developing
nation S&T
policies
should
seek to
capitalise
on
frequent
movement between the international
and national
contexts,
and
counterparting
the
people
at home.
A New Role for National Research
Systems
In this context national research
systems generally require
a new
perspective.
It is the
goal
of
many developing
nations
strategies
in
the
1990s,
along
with the
majority
of advanced
nations,
to increase
private
sector research
activity.
Given a low S&T base in
industry
in
developing
nations,
deep
MNC
penetration
into the
economy,
and
ambiguous
incentives,
these
plans may
well be unrealistic. In a
developing country
context the
public
sector will
probably always
be
required
to
play a
dominant role in economic
development.
It
will best service this
role, however,
not
by merely seeking
to
transfer commercial
products
from the
public
to the
private
sector-
as this is
likely
to have little
impact
in the
global
economic context-
but
by seeking
to
galvanise
the
learning-by-doing
and innovative
social and
technological capabilities
within the
private
sector.
Research that is most
likely
to succeed is one that is linked to the
private
sector context at its outset rather than
adjusted
later. In
most cases across
developing
nations,
such
strategies
necessitate
discarding
old models of
perceiving public/private
sector
linkages,
for these in
general
assume the usefulness of the
public
sector in
transferring
embodied
knowledge
rather than
stimulating
national
capacity
to absorb uncodified
knowledge.
Often,
these old models
seek to emulate observed
practice
in the United States or
Europe,
neglecting
to
identify
the most
important
environmental factor in
these advanced countries which is that the commercial environment
is
likely
to be
relatively
rich in
to absorb
products
of
public enterprise
research
(Hill 1987). Again,
new
models
imply
the movement of
people
and close interactions
between the
public
and the
private
sectors-to build webs of
65
relationships
that influence research
chosen,
industrial
perspectives,
educational
curricula,
contracts
negotiated,
consultancies
awarded,
etc.
Support
of Small and Medium Industries
There are new
opportunities
for the small
player-both
at the firm
and the national level-that are
emerging
within the 1990s
global
market
place.
The
key
for
capitalising
on small
player advantage
lies in
promoting
small and innovative firms that can reach
deeply
and
responsively
into remote markets whilst
capturing technological
knowledge through
immediate
organisational
relations. The link-
ages
between SMEs and national
knowledge generating
resources,
however,
are weak in
developing
nations. The fault lies on both
sides of the
public/private
sector divide.
Many
SMEs
operate
with
very
low levels of formal education
skill;
their
technological
strat-
egies
are
likely
to be
largely
-those of
adopting unopened
techno-
logical
boxes rather, than
selecting, de-constructing, adapting,
improving
and
learning-by-doing.
Both absence of
learning-by-
doing
and thinness of the
supply
line of
knowledge generating
capability
from the
public
sector should be
major
causes for concern
in the S&T
policy
of
developing
countries.
Key
Areas for
Regional Cooperation
It should also be
recognised
that the more successful
emerging
nations in
Asia,
to which
many
other
developing
nations
may
refer,
partly
because of the sheer success of their economic
growth
over the
past
two
decades,
are also
confronting
a series of obstacles
to sustain their
continuing development.
Two of the most
important
obstacles concern environmental
sustainability
of industrial devel-
opment
and
quality
control/standards. Environmental concerns
figure
on the
agenda
for national
action,
not
necessarily
for inter-
national altruistic reasons
(when developing
nations look at the
high pollution
created
by
the most
developed
countries now
seeking
to control those that have not
yet
reached this
status),
but for
pragmatic
reasons. With enhanced
lifestyle
that results from eco-
nomic
success,
environmental issues enter the
political agenda;
with environmental
labelling
and standards now
being developed
and
implemented by
the OECD
countries-particularly
with the
66
emerging
ISO
14,000
environmental standards-trade
boycotts
for
polluting
industries are a real
possibility.
This is one area where
international S&T collaboration across
developing
countries and
regions
could be of critical
importance (Hill
et al.
1994).
Further-
more,
the
very
success of
development
also
produces
severe strains
behind the
leading edge
of economic
growth. Very
often,
the
introduction of more
sophisticated
means of
production
into an
established
industry
eliminated the
suppliers already
there,
because
the
gap
in
quality
control and technical standards is too vast
(Hill
1986).
The issue of
exploring quality
control and standards
through
the entire economic fabric of the nation-well behind the
leading
edge
of S&T
industry-is
of critical
importance
in
holding
the
economy
and its distribution of wealth
together
behind the
leading
edge
of international S&T
capture
within the
global economy.
Again,
there is considerable
scope
for
pre-competitive
S&T col-
laboration across
developing
nations in these areas.
Conclusions
Finally,
we return to the
global
context from which these
principles
for
developing
nation S&T
policy
derive. This is a
dynamic
context.
Developing
nations need to
develop highly
sensitive horizon-
watching capabilities
to ensure that the
strengths
of vision and
commitment that are
commonly
embodied in
five-year
and
longer-
term
plans
are not lost in
inflexibly targeting
an outmoded
global
S&T
perspective.
It is doubtful that
any one
could have
predicted
the rise of the current
global
S&T
dynamics
ten
years ago.
The
exercise of
horizon-watching
must be a continuous one.
Again,
this would
appear
to be a task of considerable
importance
that
developing
nations
might
well
approach together.
The interests of
the advanced nations or of the OECD members are
likely
to look
at these same horizons
through quite
different economic and
plan-
ning
filters. In a
global
conference on S&T indicators held
recently
in
Australia,20
for
example,
a
fundamentally
different
perspective
emerged
between OECD members and
representatives
of the
non-OECD countries of Asia: OECD
perspectives primarily
con-
cerned
innovation,
creating technological change;
Asian
developing
country perspectives primarily
focused on
capturing
the flows of
established
technologies.
67
Most
importantly
in the new
global
context it must be understood
that the
currency
of
global competitive advantage
has
changed
as
revealed
by
the
quote
from Robert Reich at the
beginning
of this
paper.
Within the new
agenda
what matters is the level of value-
added
activity
the nation is
engaged
in within the
global
networked
economic entities.
Ownership per
se
is, therefore,
secondary
and
the
capture
of
highly
mobile S&T
knowledge
is the
primary
concern.
Entirely
different
principles
of S&T
policy
are therefore
implied,
particularly emphasising
the
development
and flows of
people
and
embedding
national S&T advance into
aligned social/organisational
strategies.
The basic
key
word is
Linkages-at
institution to insti-
tution
level,
at the national and international levels.
Lined
up against developing
nations are
major cooperating
forces within
Japan,
the United States and
Europe
that have
generated highly competitive
cross-national S&T
linkages.
In order
to
gain
some
leverage against
this multinational
power, developing
nations either within or across
regions, might
well find it worth-
while to
identify key
areas of
advantage
that could be derived from
collaborative
pre-competitive input
of the kind that in
Europe
made the ESPRIT
(European Strategic Program
for Research and
Development
in Information
Technology) programme
so success-
ful,
to
forge strong linkages
across the
developing
nations so that
collectively they
are in a more dominant
position
within the
global
knowledge economy.
The ESPRIT
programme,
modelled on the
Japanese
VLSI
(Very Large
Scale
Integration)
initiative,
aimed to
develop pre-competitive generic (that
is,
applicable
across several
sectors)
research to be undertaken
by
firms and research institutes
on a collaborative basis.
Currently
ECU 3.7 billion has been com-
mitted.
Alternatively,
a
programme probably
of
greater
relevance
to the looser
inter-governmental relationships
of the South is the
European
EUREKA
(European
Research
Co-ordinating Agency)
programme. Proposed by
President Mitterand in 1985 as a Euro-
pean
programme
to counter the American Star Wars initiative and
to
prevent highly qualified
scientists and
technologists
in this area
migrating
abroad,
EUREKA has been
shaped
into an umbrella
mechanism for
encouraging
firm-to-firm collaborations. Unlike
ESPRIT,
the
programme
has no central
funding;
instead,
projects
are
badged, verifying
the
validity
of the collaboration
proposed,
and
thereby qualify
for R&D
support funding
from national
governments.
EUREKA is
highly
successful with
funding
in
68
&squf;
September
1992
amounting
to ECU 8.84
billion,
it covers a number
of
major European projects combining public
and
private
sector
funding,
for such
projects
as
development
of the
intelligent
motor-
car,
high
definition
TV,
and the next
generation
of semiconductors.2
As a
concluding
note it must be observed that
knowledge
flows
within the new
global
order of the 1990s are set in motion
by
intense
competition.
Crucial for
entry
into this
foray
is
support
from domestic
policies
that
strengthen
and direct national S&T
infrastructure
development,
as is
support
for the formation of
industrial clusters and
strategic
alliances.
However,
whilst
competi-
tion on the
global stage
is
strengthened by strategic cooperation,
it
is a hard
fought
battle at the
leading edge.
In
keeping
with Michael
Porters observation that
global competitive capability
derives from
competitive
skills honed at home
(Porter 1990),
economic
policies
of
developing
countries must define S&T
strategies
in an economic
policy
environment that
encourages
home based
competition, par-
ticularly
to
upgrade
the
dynamic efficiency
of
organisational (as
distinct from
technological) capacities.22
NOTES
1.
Quote
from Reich
(1991: 301).
2. See
Sharp (1994). Note,
the reference is drawn from the draft on
p.
26.
3.
Sharp (1994: 24).
4. Denis Simon
(May
1993:
13).
5. See Australian
Manufacturing
Council
(1993).
6. See the
Report by
Robert
Richie, Director, University Affairs,
Hewlett Pack-
ard,
at the Third International Conference on Academic
Industry
Relations,
Academic-Industry
Relations and Industrial
Policy: Regional,
National and
International
Issues,
New
York,
1-2
May
1993
(organised by
the State Univer-
sity
of New
York).
7. David
Mowery (March 1992).
8. See Hill et al.
(1994).
9. See Hill et al.
(1994).
10. Australian
Manufacturing
Council
(1993).
11. Anne Booth
(1992: Introduction,
34-35)
and Hal Hill
(1992: 244-49).
12. See Hill
(1993).
13. These
points emerge
from the research carried out at the Centre for Research
Policy,
the
University
of
Wollongong, Wollongong,
Australia. Relevant studies
are cited here.
14. National Board of
Employment,
Education and
Training, Quantitative
Indicators
of
Academic
Research,
Commissioned
Report
No. 27. A
report
of the Board
prepared by
Policy,
Australian Government Publish-
ing
Service, Canberra, April
1994.
69
15.
Very
extensive
system-wide
data on Australias research centres are contained
in Centre for Research
Policy
Research
Report No. 3,
Research Concentration
in Australian
Higher
Education
Institutions,
Centre for Research
Policy,
Uni-
versity
of
Wollongong,
December
1993;
Centre for Research
Policy
Research
Report
No. 7,
Concentration and Collaboration: Research Centres in the Aus-
tralian Research
System:
A
Report
on the
Status,
Activities and Concentration
of
Research Centres in Australian
Universities,
Centre for Research
Policy,
Univer-
sity
of
Wollongong, September
1992. A
summary
is contained in Hill and
Turpin (1993: 7-13).
16. Michael Gibbons
(1993).
17.
Stephen Hill, Being
There: The
Importance
of Innovation in
Changing
World
Markets,
Keynote
address
presented
to IIR
(a
commercial
organisation)
Con-
ferences,
Research and
Development, Sydney,
1-2
September
1993
(available
from the Centre for Research
Policy).
Employment,
Education and
Training, Crossing
Innovation
Boundaries: The Formation and Maintenance
of
Research Links between
Industry
and Universities in
Australia,
Commissioned
Report
No. 26. A
report
of the
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