Download Cluster Approach for Promoting Innovation: Comparison of Finland

Cluster Approach for Promoting
Innovation:
Comparison of Finland and Korea
2003, October
Handong Global University
Prof. Eul Yong Park
1
1. What is the cluster approach?
(1)
For promoting innovation, close, formal and
informal, interactions and collaborations among
private sector firms, universities and research
institutions in a region are the key features. They
are forming a cluster.
2
1. What is the cluster approach?
(2)
The cluster approach also includes the
government policy to promote cluster formation
and its effective management to promote
innovation and regional development. Good
examples: Silicon valley in the US; Kista
Science Park in Sweden.
3
2. Why cluster approach?
(1)
Proven to be one of the most effective ways to
promote innovation and regional development.
Practiced in the US and Europe. In the last 10
years, successful clusters are developed in
Finland and Sweden.
4
2. Why cluster approach?
(2)
Jong Guan chon in Beijing follows this approach
in building a cluster. Increasingly, innovative
regional clusters are formed around universities
with strong R&D capability.
5
3.1 Why compare Finland and Korea?
(1)
Finland
(a) One of the few successful countries that
transformed its traditional resources based economy
into innovation driven economy in the last 10 years;
(b) World Economic Forum, IMD and OECD all rated
Finland near the top positions in global
competitiveness. This indicates strong growth
potential in the future;
6
3.1 Why compare Finland and Korea?
(2)
Finland
(c) High-tech export share continuously grew from 6% in 1990 to
over 20% in 2000;
(d) Nokia factor:
In less than 10 years Nokia, a Finish mobile telephone
equipment company, became a super multinational producer of
mobile telephone with the global market share of 35% (2002).
It is well known that Finnish national innovation system in
which cluster approach played a key role is behind in this
success experience.
7
3.2 Why compare Finland and Korea?
(1)
Korea
Relatively successful in transforming a
traditional agricultural economy into a industrial
sector driven economy in the last 4 decades. It
suffered from the lack of close collaboration
among key players in innovation system such
as universities, private sector R&D centers,
public research institutions and the state.
8
3.2 Why compare Finland and Korea?
(2)
Korea
In short, innovation clusters are not well
developed. Despite its large size of the
tertiary education sector and relatively
large inputs in R&D funding, the outputs
are not rated high in quality and future
growth potential as well as international
competitiveness are often questioned.
9
Growth Competitiveness Index
Rankings
2002
2001
United States
1
2
Finland
2
1
Taiwan
3
7
Singapore
4
4
Sweden
5
9
Switzerland
6
15
Australia
7
5
Canada
8
3
Norway
9
6
Denmark
10
14
United Kingdom
11
12
Japan
13
21
Korea
21
23
Sources: WEF 2002
10
Source: Tekes 2002.
11
Finnish Trade on High-Tech
Products 1990-2000
(Source: Tekes 2002)
12
The Share of High-Tech Exports
1988-2000
(Source: Tekes 2002)
13
4. Changes in the Finnish National Innovation
System and the Role of University
In the 1950s,1960s and 1970s universities generally
followed the traditional view: a strong autonomy in
university research and no collaboration with private
sector firms. The state’s science and technology policies
were clearly separated. Government promoted basic
science in the university ignored technology. In the
1980s Finnish government began to change its science
and technology policy:
14
4.1 Changes in the Finnish National Innovation
System and the Role of University.
Emphasis on the development of strategic
technology and innovation as well as basic
sciences;
15
4.2 Changes in the Finnish National Innovation
System and the Role of University.
Establishment of TEKES, National Technology
Agency, to use government R&D funding as the
key tool in achieving national goals: namely,
Development of innovation driven economy
through promoting firms R&D capabilities and
competitiveness;
16
4.3 Changes in the Finnish National Innovation
System and the Role of University.
Promotion of regional science parks as the hub of
technology based regional clusters;
17
4.4 Changes in the Finnish National Innovation
System and the Role of University
Decision to increase R&D funding steadily from
1.2% of GDP in 1982 to 2.2% by 1990;
18
4.5 Changes in the Finnish National
Innovation System and the Role of
University.
New concept of “national innovation system
(NIS)” was formally adopted in the official
government policy discussion;
19
4.6 Changes in the Finnish National Innovation
System and the Role of University.
A close collaboration among key participants of
the NIS, namely, universities, private sector
firms, and public research institutions was
emphasized. And more government funding was
provided to joint research projects;
20
4.7 Changes in the Finnish National Innovation
System and the Role of University.
Cross-disciplinary projects and internal
collaboration in R&D was emphasized through
Tekes funding.
21
Changes in Major Features of Finnish Innovation System
Changes in Major Features of Finnish Innovation System
Funding Mechanisms
* Shift from line item budgeting to lump sum budgeting (universities)
* Channeling funding increasingly through funding agencies
*Emphasis on competitive/targeted/program-based funding
*Multi-year budgeting
Development of research activities
* Establishing post-graduate schools, advancing “professional research careers”
* Creating Centers of Excellence system
* Establishing research, technology and “cluster” programs
* Promoting internationalization of research
* Promoting networking and collaboration
Institutional Changes
* Reinforcing the role of funding agencies and increasing co-ordination among them
* Establishing transfer and support organizations (e.g. EU liaison offices, innovation centers)
* Structural development/profiling of universities
Regulation and guidelines
* From detailed regulation to performance-based management
* Evaluation of research and technology
* Emphasis on intellectual property right (IPR)
New Conceptualizations
* E.g. “national innovation system”, ”centers of excellence”, ”accountability”
22
(Source: This table was adapted from: Nieminen, Mika.
Universities and R&D networking in a knowledge-based economy. P34)
Major
Players
of Finnish
Innovation
System
23
(Source: Nieminen, Mika and Erkki Kaukonen.
University and R&D Networking in a Knowledge-based Economy. P 37)
Research and Development 2002
RESEARCH AND DEVELOPMENT1, 2000
% of BERD2 performed in
Researchers
Higher Education
Expenditure
High Tech
Industry
Medium
High Tech
Industry
Medium
low-tech
and lowtech
Industry
Service
industry
Full-time
equivalent
Per 1000 total
employment
% of
GERD
% of
GDP
Finland
53.9
18.2
12.9
11.7
26162
11.4
17.8
0.60
France
46.6a
27.0a
11.8a
8.9a
160424c
6.8c
16.7
0.36
Germany
30.4
55.6
7.7
5.4
259214
6.7
16.0
0.40
Japan
40.7
39.3
14.1
2.7
647572
9.7
14.5
0.43
Korea
48.0
22.9
10.7
13.3
108370c
52c
11.3d
0.30d
Sweden
49.1
29.1
7.1
12.8
39921c
9.6c
21.4c
0.81c
United States
40.1
20.9
6.0
31.2
1114100af
7.9af
13.6g
0.37g
EU-15
40.4a
34.4a
9.6a
11.2b
919313g
5.6c
20.9c
0.39c
OECD Total
-
-
-
-
3235631
6.6
17.1
0.38
24
(Source: OECD 2002
Cumulative Expenditure on Educational
Institutions Per Student Over the Average
Duration of Tertiary Studies (1999)
Cumulative expenditure per student of tertiary studies
Countries
All tertiary
Education
Tertiary-type B
Education
Tertiary-type A
and advanced
research
programmes
Finland
50760
-
50760
Sweden
65529
-
-
Germany
50511
13408
67367
France
36832
23410
40901
United Kingdom
33835
-
-
Korea
18371
7232
27904
Country Mean
38668
-
-
(Source: OECD: Education at a Glance 2002)
25
Total Public Expenditure On Education
(1999)
Public Expenditure on Tertiary Education As a
Percentage of GDP
Countries
1999
Finland
2.1
Sweden
2.1
Germany
1.1
France
1.1
United Kingdom
1.1
United States
1.4
Korea
0.6
Country Mean
1.2
26
(Source: OECD: Education at a Glance 2002)
5.1 The Development of Korea’s
University System.
Rapid growth of Korea’s tertiary education
system in the last 4 decades. Currently, over
70 % of high school graduates attends
universities and colleges. The rapid increase in
quantity did not accompany with the rapid
development of quality of education.
27
5.2 The Development of Korea’s
University System.
The quality of Korea’s tertiary education system was rated low
compared with that of universities in advanced countries due to
the following factors: Factors explaining low quality of Korea’s
tertiary education system;
a.
Government funding was inadequate for
along time. Public expenditure on tertiary
education as a percent of GDP is well below
OECD average. (OECD Average: 1.2%; Korea:
0.6%; Finland: 2.1%).
28
5.2 The Development of Korea’s
University System.
b. The government very reluctant in funding private universities’
education and research in Korea where 2/3 of the total
universities are private ones.
c.
Korean university system and culture did not allow
competition and incentive rewarding system to professors
and staffs.
29
5.3 The Development of Korea’s
University System.
Management of government’s R&D funding to
universities were very inefficient: Many
ministries provided funding without adequate
coordination and close monitoring and feedback.
As a result, the output was very poor.
30
5.4 The Development of Korea’s
University System.
Low quality of Korea’s university education and
research had negative impact in development of
innovative regional clusters.
31
5.5 The Development of Korea’s
University System.
Recent changes in the Korean university system:
a. Great emphasis on close collaboration between
universities and private sector firms, especially
venture start- ups.
b. Gradual adoption of competition and incentive
system in appointment and promotion of professors
and staffs.
c. More objective project evaluation, monitoring and
feedback of projects.
32
6.1 Finnish Cluster Approach:
The cluster approach was adopted as a key
concept of Finnish national innovation system in
the early 1990s, focusing on close collaboration
among universities, private sector firms and
public research institutions.
33
6.2 Finnish Cluster Approach:
Promotion of regional science and technology
parks as a hub of the clusters. Otaniemi near
Helsinki, Tampere. Oulu regions developed such
parks around quality universities in the region.
34
6.3 Finnish Cluster Approach:
By concentrating on global strategic industry,
such as mobile telecom industry and technology,
these parks were also able to attract foreign
companies and research centers.
35
6.4 Finnish Cluster Approach:
The state, regional government as well as
regional universities played a vision provider in
developing cluster approach. Large firms, such
as Nokia and Technopolis provided the key role
as a system organizer providing formal and
informal networks and forums to firms and
university staffs.
36
Finland’s
Regional
Clusters
Source: IT Cluster in Finland37
7.1 Korea’s Cluster Approach
Korea was late in adopting regional cluster approach in
promoting innovation and industrial competitiveness.
The main reasons were:
a. Low quality of university education and research,
especially those located in the region;
b. Both universities and private sector firms did not
find good reasons why they should work closely
together.
38
7.2 Korea’s Cluster Approach
Growing global competition and changing
government policy to do the benchmarking of
advanced countries has led the adoption of
cluster approach. Potential good clusters:
Daeduk, Daegu and Busan, and some regions in
Gyunggi province.
39
7.3 The Case of Daeduk
a.
Established as a Daeduk Science Park in 1973 as
research town, benchmarking Tsukuba Science Park in
Japan.
b. Currently, 4 universities, 28 Government research
institutions, 27 private sector research centers, 44
venture start-ups are located in the park. Although the
government was able to influence those institutions to
locate physically in the region, they were not yet
formed an effective cluster.
40
7.3 The Case of Daeduk
c.
Main weaknesses are:
First, the government policy to promote the formation of
cluster and innovation were fragmented and not well
coordinated;
Second, university research capabilities and projects are not
yet attractive enough for promoting close collaboration with
private sectors firms.
Third, They are weak in attracting foreign firms, R&D
centers and educational institutions.
41
7.4 Needed New Policy
a. Strengthening university R&D capabilities
through efficient evaluation of research
projects, requiring close collaboration with
private sector firms and close monitoring of
research process;
b. Attracting foreign investment including
foreign educational institutions and R&D
centers.
42
Present Occupants in DaeDuk
Science Research Park
GRI
Private
Sector
RI
Universi
-ties
Govern
-ment
Branch
Offices
Park
Support
Venture
StartUp
Total
Number
(Org.)
28
27
4
9
4
44
116
Number
(People)
8925
3297
2319
422
37
899
15899
(Source: Seri (2002), Study of Dae-Duk Science Park)
43
R&D Indicators of Dae-Jun
(Dae-Duk) City
Private
Sector
GRI
Universities
Dae-Jun
City
1065.34
130.12
783.39
1978.85
(52.4)
(8.3)
(7.6)
(14.3)
(One Billion Won)
National
2031.98
1561.87
10254.66
13848.50
R&D HumanResource
Dae-Jun
City
7610
7928
6452
21990
(35.3)
(7.9)
(5.6)
(9.3)
(Number of People)
National
21563
100643
115026
237232
R&D
Organization
Dae-Jun
City
22
24
210
256
(9.7)
(6.5)
(4.5)
(4.9)
(Number)
National
228
368
4631
5227
R&D
Investment
Total
44
(Source: Seri (2002), Study of Dae-Duk Science Park)
8.1 Changes in Finnish R&D Funding
System and the Role of TEKES
Tekes, National Technology Agency, was established in
1983 as a key government R&D funding agency to
implement government science and technology policy.
As R&D funding was to increase from 1.2% of GDP to
2.2% in 1990 and 3.0 in 2000 (actual figure was 3.5%
of GDP in 2001), Government R&D funding can play a
key role in achieving the policy objectives.
45
8.2 Changes in Finnish R&D Funding
System and the Role of TEKES
The government policy objective was to increase
competitiveness of Finnish industries by: first,
inducing private sector firms to increase R&D
capabilities; second, by inducing close R&D
collaboration between universities, government
research institutions and private sector firms,
especially SMEs and large firms.
46
8.3 Changes in Finnish R&D Funding
System and the Role of TEKES (1)
Tekes developed and adopted strategic funding
mechanism to achieve its policy goals.
First, Tekes funding was restricted to 25-50% of
the total funding required, so that stakeholders
also use their own fund in the project;
47
8.3 Changes in Finnish R&D Funding
System and the Role of TEKES (2)
Second, Tekes funding was restricted to the join
projects with universities, private sector firms
and government research institutions.
The collaboration was also extended more
formally to appoint the researchers from GRIs
and private sector research centers as adjunct
professors in the university system.
48
8.4 Changes in Finnish R&D Funding
System and the Role of TEKES
Tekes’ performance was evaluated periodically
by international body of experts.
49
Research and Development
Expenditure in Some OECD
Countries 1985-2000
Source: OECD and Research and Development in Industry. OECD 2001
50
Development of research funding
2000 – 2003
2000
2001
2002
2003
Public funding,
Billion EUR
1.28
1.34
1.39
1.44
Public funding,
% x GDP
1.03
1.04
1.04
1.04
R&D funding,
total,
Billion EUR
4.00
4.29
4.56
4.81
R&D funding,
total,
% x GDP
3.2
3.3
3.4
3.5
(Source: Science and Technology Policy Council of Finland, “Review 2000:
51
The Challenge of Knowledge and Know-how”, 2000
Tekes funding for industrial R&D in
2000 by size of company
(Source: Tekes 2002)
52
Total Tekes R&D Funding in 2000
(Source: Tekes 2002)
53
Impact of Tekes Activities
(Source: Tekes 2002)
54
9. Weakness of Korea’s R&D
Funding System
Korea’s R&D funding inputs are substantial
(2.8% of Korea’s GDP), but the output is meager.
Why?
55
9.1 Weakness of Korea’s R&D
Funding System
University R&D capabilities except a few
outstanding universities are weak due to the long
term neglect of developing university R&D
capabilities, graduate school education and
research funding;
56
9.2 Weakness of Korea’s R&D
Funding System
Administration of the government R&D funding
and management process, from the selection of project
to the monitoring and feedback of the research projects
need to improve its effectiveness and efficiency.
Compared to Finnish national innovation system and the
role of Tekes as key funding agency, Korean
government did not have strategic goals in R&D
funding and hence limited output.
57
10.1 Concluding Remarks
Finland: Despite its fine performance of its
economy, Finland needs to further improve R&D
policy and cluster approach to stay competitive
in the world market
58
10.1.1 Concluding Remarks
They must attract excellent human resources, namely
students, researchers and engineers and foreign firms
from abroad, so that the existing clusters would become
a globally competitive ones through extensive
competition and collaboration with foreign firms in the
Finnish clusters.
Government needs to change its tax system, and other
incentive system to attract foreign inputs, human, resources
and FDIs including R&D centers.
59
10.2.2 Concluding Remarks
Finland also needs to see beyond EU, that has
already become its domestic market, as their next
market to enter, including Asia and other emerging
markets, so that growing demand from the emerging
market will strengthen its economy, especially those
products from the Finnish R&D
clusters.
60
10.2.3 Concluding Remarks
Korea must change its social and economic
system, so that foreign firms, R&D centers and
educational institutions find Korea as an
attractive place to move in and stay. They will be
good participants in the making of a competitive
R&D cluster in Korea.
61
10.2.4 Concluding Remarks
Korea must change its tax system, so that more
close collaboration between universities and
private sector firms can earn tax credits.
62