Post 2: Technological capability: enabling enterprises to innovate

This is the second post in this series about building technological capability. I believe that this technological capability is best developed by an innovation systems approach with a particular view on emergent properties of the system. I have written before about the importance of taking a business perspective on an innovation system here and here. In the previous post I explained our concept of technological capability. I argued that one of the elements of technological capability is “The skill of the producers to imitate and innovate at product, process and business model levels. This is largely dependent on pressure to compete as well as pressure to collaborate with each other”.

In this post I will look a little deeper into this ability to innovate, collaborate and competition. For the remainder of this post I will take the perspective as a knowledge broker (or facilitator) working with an technology transfer center responsible to promote the upgrading and modernization of a sector.

One of the challenges of promoting an innovation system is that the technological capability in the private sector is not easy to see. Often we have to use proxy indicators such as exports to determine whether our industries are innovative and competitive. But export figures does not tell the whole story.

While the physical attributes of a product or component could tell us something about the sophistication of the product and the process behind it, even a simple metal component could be the result of an extremely sophisticated process that combines different knowledge domains, technological capabilities, materials (combining metallurgy and sand for instance in a foundry) and enterprises. Even if you have access to the premises, the tacit knowledge, experience and networks that are accessed to make a product is not always detectable.

Not only is it hard to determine what companies are able to do, it is also difficult to figure out what they cannot do. The fact that a manufacturer three years ago developed a successful product is not a guarantee that they can still do this. The finding that a particular function or technology is not present in an enterprise does not mean that they do not have access to this technology when they need it. When the entrepreneurs claim that they lack finance to do innovation this is often merely describing a symptom.

Enterprises that are able to adapt, change and improve not only their products but also their processes and business models are essential for any economy. This is about competition, but it is also about unlocking the capability of individuals, being more responsible with resources, and being responsible within a broader socio economic environment.

Finding ways to get enterprises to collaborate is very important for the health and dynamics of an innovation system. At the same time, stimulating competitiveness, not only at the level of price, but in terms of alternative approaches to solve a problem or in terms of different ideas and concepts is necessary. Often business associations and industry bodies are good with some limited collaboration, for instance on advocacy, but not so good at stimulating new (competing) ideas, approaches, models and solutions.

For a broker or intermediary it is still possible to move between and into enterprises to find opportunities for improvement. I am often amazed at how hesitant universities, technology intermediaries and research centres are to

Searching for opportunities for collaboration

Searching for opportunities for collaboration

embrace this privilege of being able to move around in an industry to see what is possible and what constraints or barriers to innovation exists. I will expand on that in a future post in this series.

For enterprises to find out what other enterprises can or cannot do is a lot more difficult. Firstly, by asking somebody if they can or cannot do something might give them a hint that a specific opportunity exists. Secondly, many companies do not like their competitors on their premises. Thirdly, there are many risks and costs associated with working with a competitor. Lastly, there is a risk that a competitor is able to exploit a joint opportunity better and thus gain more prominence in the market.

The ability of enterprises to find opportunities to work together is important as a means of reducing costs and gaining access to resources that individual enterprises cannot afford independently. For instance, skills development, joint marketing efforts are quite easy to cooperate on.

However, on issues such as joint research and development, procuring scarce and sophisticated equipment, or collaborating in a more intensive way such as a cluster often require an external broker. Often this kind of brokerage is hard to organize at the level of enterprises. Industry associations, Universities, technology intermediaries of government programmes aimed at industry promotion must step in. This is where I earn my bread and butter as many industry support programmes are ill-equipped to diagnose, articulate and facilitate these kind of firm level collaboration processes as part of improving an innovation system.

Let me bring all of this together. Enterprises that are striving to improve their performance, their value add and their overall competitive offering are an important element in an innovation system. These enterprises are expected to compete with each other, not just on price, but with different approaches, solutions and concepts. At the same time, we expect to see that these enterprises cooperate or collaborate on issues where there are benefits to do so. The dynamic of how enterprises interact with each other (collaborating and competing) is a direct contributor to the technological capability of a region, an industry or an economy. Where enterprises are not able to work together and at the same time compete with one another, a key ingredient to the technological capability is weakened. It is not always possible for enterprises to formulate or develop opportunities for collaborating due to many risks, costs and the difficulties associated with forming the cooperation concepts. This is a technology related market failure that sometimes can only be overcome by a broker-like service of Meso-level institutions such as technology intermediaries or education institutions.

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