On December 7 I participated in an Innovation Summit sponsored by the UK Innovation Research Centre (UK-IRC) at the University of Cambridge. The UK-IRC is “a collaborative initiative for cutting-edge research and knowledge exchange activities on how innovation can make businesses more competitive, improve public services delivery and help the UK meet the social, environmental and economic challenges it faces.” It is a joint venture between the Imperial College Business School and the Centre for Business Research in Cambridge.
The topic for this year’s annual Summit was Re-thinking the Impact of Innovation. Its objective was to assess the economic impact of innovation activities by examining the experiences and best practices in the public and private sector. Alan Hughes, director of the UK-IRC and professor of enterprise studies in Cambridge’s Judge Business School, gave an introductory address whose title said it all - Re-thinking Impact: Public and Private R&D in an Age of Austerity.
Given the current economic conditions in the UK, the US and a number of other countries, there is increased pressure to develop effective methods to measure the impact of research and innovation investments on the economy. He raised a number of critical questions. How do you best measure such an impact - at an individual project; at a larger group like a lab, department or university; or at the national level? Will such economic measurements lead to an over-emphasis on some disciplines at the expense of others? Would it lead to greater pressure to meet short term goals rather than long term objectives? And, how do you best predict the future impact of disruptive, new ideas? Four different panels then proceeded to address these challenging questions through the day.
One of the questions raised during the panel was the role of the social sciences and humanities in this new information and service-based economy. Would they be left behind in favor of the STEM (Science, Technology, Engineering, Math) disciplines or can they also play a major role in the transformaton of the economy. I said that given that services are market oriented and people intensive, it was very important to have experts who understand human behavior involved in the design of the new complex social and organizational systems being developed. This should create many new opportunities for innovation in the social sciences and the humanities.
A similar point was made later in the day by Mary Walshok, who gave a talk on Unraveling the Cultural and Social dynamics of Regional Innovation Systems. Professor Walshok is vice chancellor of public programs at the University of California San Diego. She has written extensively on the world of work, including employability, career reinvention and the new innovation economy. Her latest book, Closing the Innovation Gap will be published early next year.
In her talk, she discussed why some regions in the US are better at adapting to technological change than others. Why are some communities more efficient and successful in the transfer and commercialization of scientific knowledge? Current data analysis does not provide a sufficient explanation for regional variations. We must factor in local cultural dynamics that promote or discourage innovation, which are much more difficult to quantify. These include leadership, investments and policies.
In an accompanying paper she authored for the conference, Professor Walshok wrote: “What we have observed in our work is that regions that appear to possess similar hard assets, especially in terms of research capabilities, vary dramatically in their innovation outcomes. The research question we find most compelling is how to unravel this challenge of understanding what triggers and sustains regional economic renewal and transformation drawing on research and development assets. Our assertion is that integrating the knowledge and insights the humanities and social sciences provide about communities with the analytical frameworks used by economists can result in more successful transformational strategies in more regions.”
“A key to understanding why some local communities have problems absorbing and implementing knowledge essential for strategic change may rest in our failure to sufficiently understand how geography, industrial legacies, traditional assets, and the distinctive cultural values and patterns of behavior of a region shape the types of assets a community values, as well as how information and new practices are understood and integrated. More research attention needs to be given to what are often called softer factors influencing how people perceive threats and opportunities, as well as what enables or inhibits their ability to absorb and respond to new conditions. . . . By taking a more holistic approach, which develops and incorporates metrics of both the hard and the soft factors influencing innovation outcomes, we should be better equipped to facilitate change on the ground and not just in theory.”
Walshok’s research has focused on the impact of social organizations as a major factor accounting for differences in technology commercialization and job creation among regions with apparently similar assets. The premise behind the research is that nimbleness is essential in an innovation economy, and well functioning social organizations contribute to this nimbleness by enabling knowledge flows, building trust, and breaking down hierarchical barriers. Social organizations will thus have a strong influence in a community’s ability to absorb new ideas, adopt new behaviors and accelerate innovation outcomes.
She introduced the concept of boundary-spanning organizations as creating a platform for multiple forms of interaction and knowledge flows. These organizations are primarily focused on scientific and technical innovations and commercialization, as well as on cross-functional community participation - bringing together researchers, entrepreneurs, investors, IP attorneys, business service provides and others. Her basic hypothesis is that the number, variety, level of activity and density of a region’s boundary-spanning organizations will be positively correlated with a higher rate of business startups in that region.
She tested the hypothesis by examining three US regions with similar research and education profiles in science and technology: Philadelphia, St. Louis and San Diego. They vary greatly in innovation outcomes, with San Diego significantly outdistancing the other two when normalized for population differences.
Key 2008 indicators, each normalized per 100,000 populations, show San Diego having 18 high tech startups to 13 in Philadelphia and 8 in St. Louis and 189 patent applications to 112 and 40 in Philadelphia and St. Louis respectively. San Diego received $40 million of VC funding and had 3.43 VC deals (per 100,000 population), compared to Philadelphia’s $8 million in VC funding and 1.06 deals, and St. Louis $2 million funding and 28 deals. San Diego also received $2.4 million in grants from NSF and $27 million from NIH (per 100,000 population) to Philadelphias $1.2 million and $15 million respectively and St. Louis $.9 million in NSF and $14.3 in NIH grants.
Walshok’s preliminary findings based on in-person interviews indicate that each of these regions has a different social landscape, historical legacy and embedded behaviors. Philadelphia was described as highly fragmented, with new innovation strategies and organizational platforms being developed, but only well-networked within occupational and industry sector silos. St. Louis is viewed as insular and hierarchical, with major strategic decisions being deferred to older, more well established families and legacy organizations.
San Diego used to be primarily a “navy town” with a large number of military installations and defense contractors. but the region has significantly changed in the last twenty years, and is now home to world-class technology clusters in industries like biotechnology and wireless communications. It has transformed and commercialized its previous military and defense contracting base and created thousands of high-tech companies, tens of thousands of jobs and millions in new wealth for the region. Since unlike Philadelphia and St. Louis, San Diego had a weak pre-existing industrial and business establishment, it essentially created its own entrepreneurial culture from scratch.
The next steps in the research project will be to assess whether there is a correlation between the breadth and depth of boundary spanning organizations in each region and the number of startups and other innovation indicators. It will characterize the boundary-spanning organizations and activities in each of the regions, as well as examine the links of their universities and research institutions to the regional economy.
Just about every business and government institution agrees that innovation is critical to their success. But it is no longer enough to say that you believe in innovation, fund a few projects, and leave it at that. Given the structural transformation the economy is going through, the urgent need for creating new jobs to replace those that are going away, and the pressures on budgets as we deal with mounting deficits, governments as well as companies want to make sure that their investments in research and innovation are monies well spent and will produce the expected outcomes.
As we discussed through the day at the UK-IRC Innovation Summit, measuring the impact of innovation is a very complex subject, one where we have more questions than answers. But, since ultimately you can’t manage what you can’t measure, it is a subject where we need to come up with good answers, so we can justify the continuing need for innovation investments in spite of our current age of austerity.
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