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Asian Journal of Technology Innovation

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The roles of intermediaries in sectoral

innovation system in developing
countries: public organizations versus
private organizations
a b
P. Intarakumnerd & P. Chaoroenporn
a
National Graduate Institute for Policy Studies (GRIPS) , Tokyo ,
Japan
b
Faculty of Economics , Thammasat University , Bangkok ,
Thailand
Published online: 03 Jul 2013.

To cite this article: Asian Journal of Technology Innovation (2013): The roles of intermediaries
in sectoral innovation system in developing countries: public organizations versus private
organizations, Asian Journal of Technology Innovation, DOI: 10.1080/19761597.2013.810949

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 Asian Journal of Technology Innovation, 2013
http://dx.doi.org/10.1080/19761597.2013.810949

The roles of intermediaries in sectoral innovation system in developing

countries: public organizations versus private organizations
P. Intarakumnerda∗ and P. Chaoroenpornb
a
National Graduate Institute for Policy Studies (GRIPS), Tokyo, Japan
b
Faculty of Economics, Thammasat University, Bangkok, Thailand

This paper investigates the roles of intermediaries in the automotive sector of Thailand and
observes how institutional settings affect the performance of innovation intermediaries. The
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study finds that intermediaries play a crucial role in compensating for the shortfall in social
capital that hinders the functionality of innovation systems in developing countries such as
Thailand. Organizational set-up and budgetary support are crucial for the effectiveness of
sector-specific intermediaries. The study identifies a number of tensions with regard to the
funding and governance structure of such organizations. To strengthen the role of
intermediaries in developing countries, governments should pay attention to the issue of the
division of labour and collaboration between public and private intermediaries. Public
intermediaries should play an active role in producing public goods necessary for the
technological upgrading of firms in the sector while private intermediaries should play
active roles in industry and/or firm specific issues. Public and private intermediaries should
collaborate and have a mutual understanding of which type of organizations should be
leaders on what issues. This has serious implications on government policies that initiate
and strengthen the roles and capabilities of intermediaries in the innovation processes.
Keywords: innovation intermediaries; sectoral innovation system; organization set-up; public
versus private

1. Introduction: the role of intermediaries in sectoral innovation systems

The concept of sectoral innovation systems shows that sectors differ in terms of the knowledge
base, the actors involved in innovation, the links and relationships among actors, and the relevant
institutions that help to understand and explain innovation with its differences across sectors
(Malerba 2002).
The concepts are based on the idea that different sectors or industries operate under different
technological regimes that are characterized by specific combinations of opportunity and appro-
priability conditions, degrees of cumulativeness of technological knowledge, and characteristics
of the relevant knowledge base (Carlsson Jacobsson, Holmen, and Rickne 2002).
Each industry needs to have an agency that understands the industry and is committed to its
promotion. In a sectoral innovation system, a set of actors (broadly termed as intermediaries)
might emerge. An intermediary can be defined as ‘organisation or body that act as an agent or
broker in any aspect of the innovation process between two or more parties’ (Howells 2006).
These intermediaries are required to mitigate systemic problems, especially when main actors

∗
Corresponding author. Email: prpu6@hotmail.com

# 2013 Korean Society for Innovation Management and Economics (KOSIME)

 2 P. Intarakumnerd and P. Chaoroenporn

do not realize their problems (or do not have enough capabilities) or when system failures are too
large (Intarakumnerd, Chatratana, Jirathumkitkul, and Smitinont 2010).
The role of intermediaries in innovation systems can have considerable differences. In some
cases, intermediaries are firms that help adapt specialized market solutions to the needs of indi-
vidual user firms; alternatively, intermediaries are recognized as ‘bridging institutions’ that
help link players within a technological system (Stankiewicz 1995). Similarly, intermediaries
have important roles in ‘innovation communities’ that link and transform relations within an inno-
vation network or a system (Lynn, Reddy, and Aram 1996). They facilitate the flow of information
to substructure firms.
Intermediary organizations can facilitate innovation process by performing activities that
bridge user needs and the supply side in many aspects such as technology, skills, human
resources, financial support, business and innovation strategy, new technology knowledge, and
implementation (Dodgson and Bessant 1996). Based on previous studies, Howard Partners
(2007) identified four distinct intermediary roles:
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(A) That of a consultant – covering assistance through information and advice in the recog-
nition, acquisition and utilization of relevant intellectual property (or knowledge and
technology capability).
(B) That of a broker – covering ‘brokering a transaction between two or more parties’.
(C) That of a mediator – being an independent ‘third party’ who assists two organizations to
formulate a mutually beneficial collaboration.
(D) That of a resource provider – being an agent who secures access to funding as well as
other material support for the innovation outcomes of such collaborations.
Intermediaries can be in many organizational forms such as research technology organizations
(RTOs), industrial and trade associations, professional associations, and private foundations.
RTOs can play important roles to promote diffusion and the use of existing and new knowledge
in the economy. They can perform a ‘bridging role’ that links research activities and those who
implement them. Especially in less successful latecomer countries, RTOs (despite limitations)
are probably best nexus of knowledge and human resources in those countries. With the
correct strategies, they can perform roles of coordinators or ‘fixers of systemic failures’ in national
innovation systems and clusters (Intarakumnerd and Virasa 2002).
Industrial associations play significant roles in the diffusion of knowledge and new technol-
ogies among member firms. For instance, industry associations in Japan played a major role in the
1960s to establish and run cooperative research in the camera industry and automobile parts
industry (Goto 1997).
The institutional structure is an important factor to influence the functioning of innovation
intermediaries (Van der Meulen, Nedeva, and Braun 2005). It remains important whether they
are public or private organizations or public – private constructs, for-profit, or not-for profit
regardless of the objectives of the organization, the way in which it is managed and functions,
and the way in which its performance is evaluated (Bessant and Rush 1995; Kolodny, Stymne,
Shani, Figuera, and Lillrank 2001). However, it is difficult to perform a wide array of innovation
intermediation functions within one organization. The different kinds of innovation intermedia-
tion functions have independent and particular requirements to the way they are funded and
who best executes them (Klerkx and Leeuwis 2008). Regarding the role of public – private inno-
vation intermediaries, Smits and Kuhlmann (2004) proposed that public innovation brokers
should focus on ‘content’ (i.e. linking relevant sources of information innovation processes
into a structured whole and make it easier for actors to trace already existing information) and
private innovation brokers should focus on the ‘process’ part (i.e. the support of multi-actor
learning processes).
 Asian Journal of Technology Innovation 3

Innovation systems in developing economies differ largely from those in developed econom-
ies. In many developing economies, innovation systems can be characterized as weak and frag-
mented because of the high degree of systemic failures. To mitigate these failures, different
government policies and increased effort are needed. Market mechanisms and the standard gov-
ernment intervention in the forms of laws, regulations, and incentives are insufficient to solve
these problems. The role of intermediaries is highlighted as an important actor that is instrumental
to mitigate failures (Intarakumnerd et al. 2010).
Previous studies on intermediaries in innovation systems are still limited, especially in the
context of developing countries. There are several unknown areas, especially in the different
roles and underlying capabilities of the different types of intermediaries. This study will help
fill in gaps. This study investigates the role of intermediaries under the concept of sectoral inno-
vation systems in the automotive sector in Thailand and observes how an organization set-up
influences the effectiveness of intermediaries.
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2. Technology upgrading in automotive sector in Thailand

The Thai automotive sector has remained an important industrial sector for over 30 years.
However, foreign carmakers have played an important role to disseminate important technology
that has enhanced the technological capability formation and growth of Thailand’s supporting
industries (Techakanont and Terdudomtham 2004). Transnational corporations (TNCs) actively
transfer technology through information sharing and advising local suppliers. Many TNCs’
parts suppliers (especially Japanese ones) are involved with local parts suppliers through a tech-
nology licensing contract or as minor shareholder. They have expressed their intention to be co-
owners and/or majority shareholders. Their prime objective was to take full control of the parts
manufacturing operation. This tendency of strengthening their involvement with local parts sup-
pliers has been observed since the late 1980s.
During the 2000s, TNC investment strategies in the automotive industry started to change as
began to invest in technologically sophisticated activities in Thailand, such as advanced engineer-
ing, process and product design, advanced testing, and validation. Several major automotive
TNCs (mostly Japanese) have set up technical centres in Thailand, separated from their normal
production plants.
Indigenous Thai part suppliers have low technological capabilities and are largely dependent
on technology provided by JV-partners or licensers; however, they cannot absorb the transferred
technology due to a lack of skilled labour (Brooker Group 2002). Most local suppliers have been
unable to deal well with these changes and have stepped down to a lower tier; subsequently, some
may lose future orders if they remain at the same technological level they currently maintain.
Indigenous Thai part suppliers recognize the need for independent product development, due
to an eroding comparative advantage or the loss of important customers that have in many cases
moved to China (Kohpaiboon 2006). To survive, indigenous Thai part suppliers (as the technol-
ogy transferees) need to increase indigenous technological capabilities, especially absorptive
capacities. They are forced to upgrade skills and enter the original brand manufacturing
(OBM)-market with independent product developments. They used various means to achieve
this goal that include the recruitment of retired foreign R&D-engineers, licensing, joint ventures
with European firms, and intensified cooperation with customers. Information from international
exhibitions is also important. Some firms utilize external knowledge, e.g. from designers or
universities to develop technologically simple OBM-products (Berger 2005).
This change highlights the increased importance of local actors in Thai automotive innovation
systems (especially universities and public research institutes) in supporting TNCs and local sup-
pliers to upgrade their activities from production to more technologically sophisticated activities.
 4 P. Intarakumnerd and P. Chaoroenporn

3. Intermediaries in the Thai automotive sector: public versus private organizations

In a mid-tech industry (like the automotive industry) a cluster mainly composed of small local
firms originally relies on tacit assembling skills for technologically progress with external
support from a government ‘sector-specific’ authority that behaves like an intermediary. The
Thai Automotive Institute (TAI) was initiated as an independent public organization under the
Ministry of Industry in 1988.
Besides TAI and the National Metal and Materials Technology Centre (MTEC), there are
some private industrial association that play an intermediary role in the automotive cluster
such as the Automotive Industry Club and Auto-parts Industry Club under the Federal of Thai
Industries, Thai Auto-Parts Manufacturing Association (TAPMA), and Thai Automotive Industry
Association (TAIA). However, this study will focus on TAPMA because its members are mainly
Thai indigenous second to third tier part suppliers. This section will explain TAI and TAPMA as
representative public and private intermediaries in the automotive industry.
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3.1 TAI
The TAI was established by Cabinet resolution on 7 July 1998 to strengthen government and
private enterprise co-operation to enhance the competitiveness of the Thai automotive industry.
TAI is now a sector-specific promotional and intermediary agency for the automotive industry.
TAI is not a part of the national bureaucracy but falls under the Industry Development Foun-
dation set up by the Ministry of Industry; subsequently, the organizational administration is rather
flexible. It is not subject to the rules and regulations of ordinary government agencies and state
enterprises. TAI’s governing committee (headed by the Permanent Secretary of Industry) com-
prising government and private-sector representatives as well as academics. The committee is
responsible to define operational objectives and the scope of work as well as supervise the man-
agement of the institute.
TAI has around 100 employees. Only around 10% of them have master degrees. The rest
(90%) have bachelor degrees or lower. Around 30 have engineering degrees (mostly mechanical
and industrial engineering) and 20 (technicians) have vocational qualifications; the rest are
support staff with social science backgrounds.
TAI received direct government funding only for the first five years from its inception; then,
it was expected to become a self-financed agency. TAI has to ask other government agencies in
the Ministry of Industry (Office of Industrial Economics, Permanent Secretary’s Office, and
Department of Industrial Promotion) for project funds on an ad hoc basis or else undertake
the projects proposed by these agencies such as writing up industry master plans and training
personnel of small and medium enterprises. Subsequently, TAI sometimes has budgetary
difficulties.
TAI has four major strategies:
Strategy 1: Establish support for a positive Thai automotive business environment.
. To conduct an in depth policy research of the automotive industry to find suggestions to
support supply and demand business operations. Useful information is applied for policy
settings, plan formulation, and industry warnings. Information is disseminated and system-
atically exchanged under the information and technology system.
Strategy 2: Efficiency and productivity improvements in the Thai auto-parts industry.
. To act as a knowledge-development centre for auto-parts production technology transfer
that will prompt auto-parts makers to initiate higher productivity manufacturing and man-
agement systems. Consultancy services are to be provided by experts in several fields as
well as human resources development.
 Asian Journal of Technology Innovation 5

. To support the development of the automotive industry human resources (particularly in the
operations) that can enlarge the productivity and capacity of human resources in operations
to provide instructors or coaches. Industry demand is satisfied by the optimization of exist-
ing networks and human resource capacity.
Strategy 3: Establishment of an engineering and testing knowledge base.
. To provide product analysis services for testing, inspection, and certification.
. To have ISO/IEC 17025 certification for testing laboratories. This allows the Automotive
Testing Centre to be domestically and internationally recognized. In addition, the centre
provides integrated support and services for the development of auto-parts through the col-
laboration of automotive industry development where product analysis, testing, and inspec-
tion experts can provide assistance. Other related agencies and units are linked for the
automotive industry development.
Strategy 4: Enhancement of Management Efficiency
. To provide efficient services. The Thailand Automotive Institute conducts activities to
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support the implementation and coordination of internal units with outside-related units.

The following organizational structure demonstrates the strategies of TAI (Figure 1).
TAI compiles, studies, and analyses data, information and related situations that are used as
supporting data for recommendations, guidance and warnings to private sectors (directly and
indirectly) related to automotive industry organizations. This will enable organizations to plan
short-term and long-term operations and recommend automotive industry development policy-
guidelines, invasive industrial planning and industry direction.
The most prominent study conducted by TAI is the Master Plan for the Thai Automotive
Industry. TAI was commissioned by the Office of Industrial Economics under the Ministry of

Figure 1: Organizational structure of the Thailand automotive institute

Source: Thailand automotive institute
 6 P. Intarakumnerd and P. Chaoroenporn

Industry to draft two master plans for the industry. The first master plan covers 2002 – 2006, and
the second master plan covers 2007 – 2011. TAI started the drafting process by organizing a CEO
Forum. Though it seemed to be engaging the private sector, key participants were from subsidi-
aries of TNCs in Thailand and not from their headquarters; subsequently, it is difficult to get clear
commitment from the TNCs to implement the plan. The chief reason for this impasse was that the
plan was too comprehensive and tried to satisfy everyone for political reasons. No clear priorities
were set on what should be done first? The most significant recent policy decision was to pick the
‘eco passenger car’ (in addition to the one-ton pick-up truck) as a product champion was not
specified in the plan.
For the development of parts manufacturers, TAI has defined competitive capability building
of the parts manufacturers as an important task. The institute has provided consultancy to improve
production processes and organization management led by experts and engineering teams with
expertise in each area; in addition, the institute has co-operated with international experts and
organizations to solve problems in the product development and production processes for parts
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manufacturers.
TAI has a database of 2000 part manufacturing companies. TAI would like to upgrade the
technological and innovative capabilities of these companies through its consultancy and
testing services (through its testing centre in Bang Pu, close to Bangkok). Most of its activities
in this regard consist of testing whether components and parts produced by these companies
are up to international standards (hence, qualifying to be exported or to be part of the value
chains of TNCs). This task is critical to Thai parts manufacturers that do not have expensive
and sophisticated in-house testing facilities; however, TAI cannot do much in terms of upgrading
the capability of these companies to meet such international standards due to a lack of funds and
human resources.
TAI provides public and in-house training and capability testing with a concentration on the
content required by the automotive industry (productivity, quality systems, administration, and
management). The institute also provides a system to certify the capability of people in metal
moulding, plastic injection, and lathe and milling machine operation. The training and capability
testing are theoretical as well as hands-on. Capability certification helps to promote systematic
personnel development and enhances the acceptance of personnel capability standards; simul-
taneously, the parts manufacturers in this industry can reduce costs and increase competitive
capability.
The most important organized TAI human resource development programme is the joint Thai
and Japanese Automotive Human Resource Development Program (AHRDP); in addition, the
Federation of Thai Industries also joined the AHRDP. The Japan International Cooperation
Agency (JICA), the Japan External Trade Organisation (JETRO), and the Japanese Chamber
of Commerce (JCC) led the Japanese side. The programme is to upgrade the capability of
local parts manufacturers and its mission is centred on the enhancement of Thai automotive work-
force capabilities through a large-scale ‘train the trainer’ programme and establishing a skills cer-
tification framework. Eventually, graduates of the programme should be able to train other people
in their companies or supplier networks. Four leading Japanese companies participated in the pro-
gramme by providing training experts and course materials: these were Toyota (the Toyota Pro-
duction System), Honda (mould and die technology), Nissan (scheme for skill improvement), and
Denso (manufacturing skills and mentoring management). The training covered theoretical
knowledge, hand-on skills, and attitude. Thai university professors were also invited to teach
theoretical courses. The parts manufacturers (foreign owned, joint venture, and local) needed
to shoulder some costs either in kind or in cash. Executives of these companies had to show a
commitment to the programme and send qualified people to participate. They were required to
share their knowledge and skills with other companies and allow others to visit their factories.
 Asian Journal of Technology Innovation 7

AHRDP is a remarkable programme. It has created a pool of talented trainers and has
improved the awareness of the importance of human resource development in the sector;
however, the results of upgrading the Thai automotive workforce are ambiguous. Some compa-
nies (especially larger ones) established training centres or training courses after joining AHRDP.
Uptake was less enthusiastic for smaller companies. TAI also conducted a onetime follow-up
investigation that was a year after the programme had ended. In addition, the recent economic
and political crisis prompted some trained technicians to leave the industry and work in unrelated
business with no automotive skills requirements.
TAI proposed a second phase for AHRDP and worked hard to have the programme included
in the recently signed Japan – Thailand Economic Partnership Agreement (JTEPA). The new
phase will focus on higher and more comprehensive levels of knowledge as well as proficiency
in engineering and R&D activities required to upgrade the Thai automotive industry in the global
value chain. Nevertheless, the project has not yet been initiated due to international and domestic
political conflicts.
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The qualified success of AHRDP highlights the important role of an ‘intermediary’ to facili-
tate the collaboration of key players in the sector. TAI has performed a crucial role in bringing
TNCs, parts manufacturers (local and foreign), Thai universities and government agencies to
work together for the overall benefit of the industry. It has somewhat successfully bridged differ-
ent expectations and interests to overcome a high level of mutual distrust among the stakeholders.
This is a rare phenomenon in Thailand, whose national and sectoral innovation systems are weak
and fragmented, and where trust between companies, government agencies, and universities is
weak.
The roles of TAI are somewhat coherent to what Klerkx and Leeuwis (2008) have suggested,
where public funding should be directed towards supporting tasks such as foresight, problem
diagnosing and needs articulation, scoping and filtering (selection of collaborative partners),
and network brokerage roles. These services generally take place in the precompetitive stages
of the innovation process and are unrecognized as competition by traditional knowledge-intensive
business services (KIBS) providers. Subsequently, TAI under-performed because of the miscon-
ceived self-financed organizational set-up. Lack of budget and authority prohibited TIA to
perform ‘public-good’ activities to upgrade firms in the sector as a whole.

3.2 TAPMA
The TAPMA was created with approval from the Ministry of Commerce on 29 June 1978. It is an
association of auto-parts manufacturing companies from the private sector and serves as the
central voice for auto-parts industrialists in the country to protect, support, and develop Thai
industries. TAPMA was formulated to perform the following roles:

1. Support production enterprises (or hiring) to produce automobile parts, components, and
tools by partnering with the government for support.
2. Support members by tackling problems and negotiating on behalf of members to establish
common benefits to their enterprises and the sector as a whole. Monitor and follow the
domestic and international movement of parts, equipment, tools, and accessory markets
for the benefit of the country’s economy and finances.
3. Research the latest technical and production developments for parts, equipment, tools, and
accessory enterprises in order to exchange and publicize this knowledge to members.
4. Requests for members’ statistical information, documents, or information (with explicit
permission from individual members) that concern enterprises that deal with parts, equip-
ment, and accessory projects.
 8 P. Intarakumnerd and P. Chaoroenporn

5. Support members in the production of quality auto-parts, equipment, tools, and accessories
that meet or exceed international standards and encourage the production of components
that fulfil market demands. In addition, promote research and improvements in production
and marketing processes.
6. Formulate agreements for members that detail their roles (including do’s and don’ts) in
operating smooth and problem-free manufacturing plants for parts, equipment, tools,
and accessories.
7. Negotiate conflicts between members and between members and outside parties.

The organizational chart of TAMPA demonstrates the above roles (Figure 2).
The TAPMA has limited human resources and operating funds, the TAPMA only receives
annual funding from her members and no support from the government. Currently, TAPMA
has 528 firms/companies on its membership list (1st tier – 3rd tier firms/companies in the automo-
tive parts and related industries).
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TAPMA is more like a lobbyist group that seeks government favours. Its role as an intermedi-
ary is limited to connecting members to other actors in the automotive sector. However, the
association recognizes three major challenges for automotive manufacturers: short-term chal-
lenges – reduce product weight and cost, medium-term challenges – CO2 emissions and the auto-
motive carbon footprint, and long-term challenges – adopt electric and hybrid car technology.
TAPMA and all its members need to conduct continuous R&D in order to cope with these
challenges.
The key obstacle for the TAPMA relationship with universities is the different perceptions of
the level of service that each party expects and receives. The industry wants universities to be total
solution providers; however, universities limit their role to testing automotive parts sent by man-
ufacturers and providing limited services. Their linkages with universities or government organ-
izations are affected by individual members and not by TAPMA (except for government policy
issues and government intervention). TAPMA also links with international automotive-related
organizations to initiate projects (such as adopting ISO standards for automotive parts) to
create trust in the Thai automotive parts industry.
Another project is to increase the competitiveness of the Thai automotive parts industry. The
current project is to establish product/process champions. At present, the Thai automotive parts
industry produces almost every part and uses all processes without a clear understanding of
which products or processes the industry is good at. It is essential to identify special advantages

Figure 2: Organizational structure of Thai auto-parts manufacturers association

Source: Thai auto-parts manufacturers association (http://www.thaiautoparts.or.th/about_us.php)
 Asian Journal of Technology Innovation 9

and then ask for help from the government to initiate a support policy for this process/product
champion.
The result of TAPMA’s linkages with government bodies should be seen in terms of govern-
ment policy to support the Thai automotive parts industry, rather than directly in the increasing
technological capabilities of its members. An example of a result of the linkage is the establish-
ment of a domestic and international standard for automotive parts.

3.3 Public and private intermediaries: TAI versus TAPMA

The division of labour and collaboration between a public intermediary like the TAI and a private
intermediary like TAPMA remains an issue. TAI (a semi-government agency) has a clear advan-
tage to provide resources and consultancy since these functions require continuous financial
support; however, TAPMA can be a better broker due to the better understanding of private
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firms and the trust of members. Both TAI and TAPMA can perform the role of mediator, depend-
ing on whose parties they are dealing with. TAPMA did well to mediate conflicts between
members (part suppliers), while TAI has a relatively stronger authority to encourage collaboration
between foreign carmakers and local suppliers (Table 1). Table 2 summarizes the relative strength
of the division of labour between TAI and TAPMA. A dark circle indicates a dominant or leading
role and an empty circle signifies a supporting role.
The lack of a clear division of labour between public and private intermediary is a problem.
Sometimes, the TAI does not like TAPMA’s direct engagement in government projects, for
example, training personnel of small and medium enterprises, hence, bypassing TAI. The tensions
between TAI and TAPMA indicate the need for a proper demarcation of the mandate of publicly
financed innovation brokers. TAI and TAPMA activities that surpass demand articulation and
network formation can be perceived as competition by public research organizations such as

Table 1: Summary of intermediary roles of TAI and TAPMA

Intermediary
roles Activities
Consultant TAI provided consultancy to improve production processes and management. TAPMA
did not perform this role distinctively
Broker TAPMA industry support for the establishment of domestic and international automotive
part standards (the TAI role was secondary)
Mediator TAPMA acted as a ‘third party’ to mediate conflicts between members. TAI initiated
project to use engineers from foreign carmakers to train local engineers of part
suppliers (AHRDP)
Resource TAI provide public good necessary for the technological upgrade of firms in the sector
provider accessed by most local firms and initiates R&D upgrade programmes in value chain
fields critical for industry survival. TAPMA lacks resources to perform this role

Table 2: TAI and TAPMA division of labour

Intermediary roles TAI TAPMA
Consultant † 8
Broker 8 †
Mediator † †
Resource provider † 8
 10 P. Intarakumnerd and P. Chaoroenporn

KIBS or traditional providers of innovation brokerage services such as industry associations and
chambers of commerce (Klerkx and Leeuwis 2008).
The ambiguous status of TAI (as a government agency with a policy formulation mandate
and/or as a truly flexible private organization) makes it difficult for it to initiate policies and coor-
dinate with large players in the public and private sector (especially TNCs). This is a question of
authority and creditability.
The lack of annual direct government budgetary support also makes it difficult for the TAI to
perform ‘public-good’ activities necessary for the technological upgrading of firms in the sector.
These activities include important but expensive training in critical skills, knowledge that cannot
be privately accessed by most local firms, initiating R&D upgrade programmes in the industry
value chain fields critical for survival (e.g. hybrid and electrical vehicles).
The TAI has to survive in the short run by offering services that easily make money but may
not be so critical for long-term sector-wide upgrades and are in direct competition with private
service providers. Having a publicly funded innovation intermediary to perform such critical
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roles is necessary for long-term industry survival and competitiveness. This finding has substan-
tiated previous studies on intermediaries such as Bessant and Rush (1995), Senker and Faulkner
(2001), and North and Smallbone (2006).
In principle, intermediaries should provide ‘one-off’ services as well as offer longer-term rela-
tional innovation capabilities. These services provide opportunities for intermediaries to under-
stand clients better as well as earn more lucrative and value-added contracts. However, many
intermediaries in Thailand (similar to TAI) still manage ‘one-off’ services rather than offer
long-term relationships due to limited capabilities.
TAI has had to join projects initiated by other government agencies that might not match the
key missions of TAI or be a high automotive industry priority. Therefore, it is important that TAI
receive sufficient continuous budgetary support from the Thai government. The official organiz-
ational status needs to be clarified and strengthened from the viewpoint of the government and
private-sector industry.
Our case study confirms Klerkx and Leeuwis (2008) that it is difficult for an innovation inter-
mediary to make the basic functions of network formation self-sufficient. The study also exacer-
bates recommendations from previous studies (Rosenfeld 1996; Huggins 2001; Klerkx and
Leeuwis 2008) that policy-makers should have a longer-time horizon when they consider ratio-
nales and the roles of public intermediaries. A self-sufficient organizational set-up is not appli-
cable to a type of organization that provides public-good services to upgrade the sector as a
whole. However, the political reality is that the use of public money to finance public intermediary
organizations requires proof in the ability to upgrade the capability of a sector. This can be diffi-
cult to evaluate through standard methods; in addition, TAI has a difficulty to demonstrate its
sector-wide impacts. TAI can only report its achievements by providing simple outputs such as
the number of activities, projects, participants, and client satisfaction. Research on how to quan-
tify the long-term ‘systemic’ impacts of intermediaries is salient.

4. Conclusion and policy implications

Organizational set-up and budgetary supports are crucial for the effectiveness of sector-specific
intermediaries. Public intermediaries (that are responsible to promote the industry) lack the
will power to establish a holistic industrial promotion policy and sometimes conflict with
private intermediaries if they have dual roles and lack coordination with private intermediaries.
Public intermediaries rely on income from their services to local firms if they lack operational
funds. Some are in competition with private-sector service providers. These activities diverges
the intermediaries from performing critical roles they were assigned or supposed to perform.
 Asian Journal of Technology Innovation 11

The government should concern the issue of the ‘division of labour’ and collaboration between a
public and a private intermediary. It does not mean that public and private intermediaries must
have a mutually exclusive relationship but they should engage each other either active or suppor-
tive role.
Public intermediary should play an active role to produce ‘public goods’ that are necessary for
the technological upgrading of firms in the sector; in addition, private intermediaries should
support these activities. The role of intermediaries to produce public goods consist of: formulating
policy (sectoral master plan), creating new possibilities and system dynamics by connecting
actors, and providing important but expensive training in critical skills and knowledge that
cannot be privately accessed by local firms; in addition, providing testing facilities and initiating
R&D upgrade programmes in industry value chain fields critical for survival. They should
perform a bridging role that links research activities and those who implement them.
Private intermediaries (like industrial association) should play an active role in the industry or
firm specific issues such as promoting trust among members, diffusing technology know-how and
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information, and assisting members in upgrading the manufacturing technologies, expansion of

international marketing ability and operational management. Industrial associations may serve
as a bridge for industry and government communication.
Public and private intermediaries can cooperate in some activities such as negotiating conflicts
among local producers and conflicts between association members and outside parties to establish
common benefits for members and the sector. The AHRDP shows some possibility of public and
private cooperation to facilitate the industry’s human resource development.
Policy recommendations are emphasized in two areas to strengthen intermediaries that
support sectoral innovation system in developing countries.
First, intermediaries should be able to rally support and engagement from the members. The
roles of industrial associations and sector-specific intermediaries have played significant roles to
build trust between actors of the cluster and encourage knowledge flows. Trust is the fundamental
element needed for all parties to work together. The role and authority of intermediaries should be
clearly defined to strengthen trust; in addition, intermediaries must actively engage in driving the
mission to lead capability development in the industry.
Trust among intermediaries should be developed. The basic understanding of the priorities and
limitations of each intermediary is very important. More opportunities for personal exchange
should be initiated to avoid misunderstandings and conflicts between intermediaries so that all
members can mutually learn from the direct experience of being a part of one another. Government
incentives should encourage an individual to actively engage in industry development as well
as promote collaboration among the members to strengthen trust within industrial associations.
Second, intermediaries should have adequate capabilities and budget to perform ‘public-
goods’ activities. The funding should be sufficient to support the mission. This would allow inter-
mediaries to take the initiative and lead the industry versus simply proposing ideas and then then
seeking financial support before starting work; subsequently, intermediaries could maintain a lea-
dership position.

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