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Sreekanth Raghunath Zeus Numerix Pvt. Ltd., 11, Brindavan Layout, Subramanyapura P.O., Bangalore – 560061 Email: firstname.lastname@example.org Ph: +91 9739142852
Declaration: The author hereby declares that the work presented in this paper is his own, and it has neither been published nor submitted for publication elsewhere.
Disclaimer: Kindly note that the views presented in the paper are that of the author alone, unless otherwise mentioned, and do not necessarily reflect the views of the author’s current or past employers.
Strategic Research Partnerships in the Indian context: An immediate and compelling need for awareness, data and policy initiatives.
With an ever increasing number of new technology innovation ventures coming up in India, it becomes excessively important to study and implement the means for their survival and growth. In developed economies, small and medium enterprises having few resources to invest in research and development tend to pursue Strategic Research Partnerships (SRPs) to overcome the barriers posed by the resource crunch. Even though this might be true to a certain extent in the Indian context, there is very little literature available reporting systematic studies of such activity. This paper aims to highlight the necessity and advantages of formation of SRPs, the data initiatives needed to establish an accessible knowledge bank about the performance of SRPs and policy initiatives that could drive such partnerships, specifically in the context of the burgeoning technology innovation market in India. A brief review of SRP-related literature based on studies carried out in Japan, EU, USA, and a few Asian countries is presented, to introduce the uninitiated reader to the concept of SRPs.
The Indian technology innovation marketplace is set to scale new heights, with professional support system being made available along with venture capital support to deserving technopreneurs. For example, National Entrepreneurship Network (NEN) proposes to launch twenty-five hundred entrepreneurs who will potentially create about five hundred thousand jobs in India by 2014 [TM Eye, 2007]. Availability of venture capital (VC) funding for the right technology innovations has been on the rise, which recently received a boost due to Dr. Narayana Murthy’s Catamaran Venture Fund joining the bandwagon of VCs.
However, even in the global context, it has been observed that a high percentage of start-ups find it difficult to survive the initial formative stages and hence, perish. Across various industry sectors, the failure rates of start-ups can be as high as 60 % within four years of starting the enterprise, as shown in Figure 1 [Knaup, 2005]. One of the strong reasons for this
is the lack of an organized innovation ecosystem [Fidelman, 2008]. A few major components that make up the ecosystem include resources in terms of accessible financial resources, talented human resources and well-developed infrastructural resources and of course, an active market where the products/services could be sold.
Figure 1: Failure rates of start-ups in various industry sectors, within four years of starting up. [Knaup, 2005]
Small and medium enterprises (SMEs) quite often face problems in setting up such an ecosystem for themselves. One of the means for overcoming the barriers posed by such a resource crunch is the formation of Strategic Research Partnerships (SRPs), which are broadly defined as “innovation-based relationships that involve, at least partly, a significant effort in research and development (R&D)…” [Hagedoorn et. al, 2000].
Most studies conducted, until the early 1990s, to understand the advantages of SRPs and the indicators of their effectiveness were empirical in nature. Section 2 of this paper reviews collected data and analysis reported in the last two decades, pertinent to SRPs in various industry sectors from across the globe. The review also includes researchers’ recommendations on proposed changes to certain government policies that could enhance the appearance and performance of SRPs. The author strongly believes that this exercise would set the foundation for further developing a good understanding of the concept of SRPs, before applying it in the Indian context.
Section 3 discusses the recent developments in the Indian innovation arena and the immediate need for an understanding of SRPs among the members of entrepreneurial fraternity to boost the survival rates of the Indian technology innovation ventures. Section 4 discusses the possible data and policy initiatives that could serve as a catalyst to the growth of a healthy innovation ecosystem in India, followed by conclusions.
2. Literature Review:
2.1 Categorization of SRPs and their benefits: Formation of Strategic Research Partnerships (SRPs) is a concept pioneered by the Japanese commercial research community, which was followed by firms in the USA, several countries from the EU and a few Asian countries including South Korea and Taiwan [Sakakibara and Dodgson, 2003]. SRPs essentially involve a shared commitment of resources and risk by a number of partners, either entirely private or involving public and private players, to agreed complementary research aims [Siegel, 2000; Sakakibara and Dodgson, 2003].
Public–private partnerships receive some level of support from a public institution and can take various forms, such as, government subsidies for projects funded by private firms, shared use of expertise and laboratory facilities, university technology incubators, science parks, licensing agreements between universities and government laboratories and private firms and university based start-ups etc. Public-private partnerships are more prevalent and hence studied more extensively. Private–private partnerships generally take the form of joint ventures, strategic alliances and networks involving two or more private companies [Siegel, 2000].
Whereas in a private–private partnership, the term strategic could be applied to indicate profit maximization as the objective, a public–private partnership’s strategic objective would be to address an innovation market failure and ultimately, enhance economic growth [Siegel, 2000].
Most of the measurement and empirical analysis of innovation until the early late 1980s was focused on large corporations. However, over the last two decades, compelling evidence has been provided indicating that smaller firms generate a significant amount of innovation activity, especially in new and emerging industries [Audretsch, 2000]. Measurement of research partnerships involving small high-technology firms can be very difficult owing to the fact that their survival rates are very low, which makes it difficult to identify and track them over time. Small firms are also notorious for forsaking formal R&D for informal research, which typically defies measurement. Some firms do not report research and measuring research partnerships involving such firms becomes even more challenging [Audretsch, 2000]. Size-inherent competitive disadvantages are the most compelling reasons that drive smaller firms to develop a strategic partnership, to be able to effectively increase their scale and scope [Gomes-Casseres, 1996].
Strategic research partnerships have been associated with high–technology R&D intensive sectors and other sectors where learning and flexibility are important features to remain competitive [Gomes-Casseres, 1996]. This dominance has been observed over the last four decades in sectors like pharmaceuticals, information technology, aerospace and defense etc, as shown in Figure 2. Earlier, such partnerships were dominant in medium–technology sectors like automotive, consumer electronics, medical equipment and chemicals. SRPs
enable companies to learn from a variety of sources (partners) in a flexible setting (temporary) of alliances [Hagedoorn, 2000].
Figure 2: The dominance of high-technology companies forming research partnerships [Hagedoorn, 2000].
SRPs are considered socially useful as they expand the effective R&D resources applied in innovative investment [Scott, 2000]. Some of the benefits of SRPs reported in literature include [Mowery, 1998]: • • • • • • To enable member firms to appropriate knowledge spillovers, which would otherwise be lost, To enjoy benefits of economies of scale and scope in research, To minimize duplicative R&D performed by the members, To speed-up the commercialization of technologies, To facilitate transfer of knowledge from universities to industry To provide access to unique capabilities of government labs.
Some of the other motives behind formation of SRPs reported in literature include [Hagedoorn, 2000]: • • Sharing of research costs and uncertainty, Access to complementary technologies,
• • •
Capture a partner’s tacit knowledge, Entering foreign markets, and Expand the product range.
2.2 Data initiatives and indicators:
Technology innovation is a sufficiently complex concept, which is impossible to measure directly, because of interaction of many different resources within and among firms. It is comparable to measuring the health of a human being, which has no single measure, but relies upon a range of indicators such as body temperature, skin color, levels of various components in the blood etc. Similarly, indicators of innovation provide information on various facets of the innovation process, helping understand the phenomenon better and assisting formulating the innovation policies [Hansen, 2000].
Organization for Economic Cooperation and Development (OECD) held a series of workshops from late 1970s to mid 1980s, to bring together individuals working on developing indicators of technological innovation. The deliberations at those workshops and further activity in the Scandinavian region, led to the development of a framework for a guide to collecting innovation indicator data, called “The Oslo Manuals”. Two of them were prepared within a span of 5 years. The first manual was followed up with a Community Innovation Survey (CIS), which collected indicator data from over 40000 firms spread across the EU, based on which a second manual was brought out. This was again followed by another CIS, probing into aspects such as R&D expenditure and R&D employment statistics, among other queries [Hansen, 2000]. Readers interested to know more about development of indicators of innovation are encouraged to refer to this paper by Hansen.
Coming back to the point in focus, research partnership was one of the indicators prescribed in the manual and the surveys, asking the respondents for a categorical (yes/no) response as to whether they received government financial support for innovation activities. Although the term SRP was not used in those documents (manuals or surveys), almost all forms of interfirm relationships were included and a question was asked as to whether the firms were involved in any joint R&D or other innovation projects as well as whether the partnering firms were from within EU or from US or Japan or elsewhere [Hansen, 2000]. This paper by
Hansen also discusses other innovation indicator surveys conducted in US, Canada etc and provides tips for response rate maximization.
The US National Science Foundation (NSF) conducted a workshop on Strategic Research Partnerships in October 2000, where researchers from across the world discussed the various aspects relating to SRPs. Discussion during the workshop ranged from the need for formation of SRPs, their economic impact, SRP-related data indicators and recommendations for policy makers. Several articles cited in the present paper were those presented at the NSF workshop on SRP.
In order to determine whether the government should promote SRPs, empirical examination of existing SRPs can be informative. Supporting SRPs is one of the many tools that the government can use to stimulate innovative efforts. Issues regarding their formation, their effect on R&D spending of participating firms and their productivity have discussed in sufficient detail elsewhere [Sakakibara and Dodgson, 2003]. Mapping techniques based on patent and bibliometric data, international and national surveys, specific databases on alliances, network analysis and case studies are discussed as some of the effective means of measurement of performance of SRPs. Emphasis is laid on collection of a lot more amount of reliable data from within Asia, which could help both policy makers and managers considering participation in SRPs [Sakakibara and Dodgson, 2003].
Some of the questions that can arise while developing data indicators on SRPs are listed below and discussed in detail elsewhere [Bozeman and Dietz, 2000]: • • • • • Are SRPs entirely formal research vehicles or do they also include informal collaborative research? When do SRPs begin and end? What is the impact of SRPs on aggregate economic growth? To what extent does the construct of SRPs conform to various measures and methods for assessing them? How does the international and global nature of SRPs affect their appropriate conceptualization?
Some questions as part of the data indicator evaluation, which help categorize SRPs are also briefly discussed [Bozeman and Dietz, 2000]: • • • • To what degree does the research conducted under an SRP substitute or complement existing research internal to the member organizations? What kind of research is performed as part of the SRP? Is it more or less fundamental, applied or strategic compared to other research of the member organizations? What would constitute indicators of success to the organizations who are part of an SRP? How do or should indicators of SRPs relate to international partnerships and research arrangements of multinational enterprises?
The above questions and some others that haven’t been mentioned here, have answers that are very relative in nature, related closely to the innovation ecosystem in which the questions are posed. Nevertheless, answers to the above questions are expected to provide a clear perspective while developing indicators about formation and performance of SRPs.
2.3 Policy initiatives:
Public policy has been found to play a major role with regard to innovation in general, and SRPs in particular. In Japan, Technological Research Associations (TRAs) were formed to promote R&D consortia and enhance the productivity of Japanese industries. Under this scheme, participating companies enjoyed several tax benefits, including accelerated depreciation for expenses on machinery and equipment, instant depreciation and discounts of property taxes on fixed assets used for R&D activities. TRAs were used as substitutes to protective policies adopted earlier towards domestic industry in terms of direct R&D subsidies to individual companies etc. Similar policies were adopted in Korea as well, and have met success. In Taiwan, due to predominance of smaller firms, Industrial Technology Research Institutes (ITRIs) have been instituted, which aim at diffusion and application of research findings [Sakakibara and Dodgson, 2003].
The Bayh-Dole Act passed in the US in 1980, which gives universities the right to patent inventions generated under federally sponsored research, is not per se a partnership program, but clearly has had a significant impact upon the magnitude and content of university–
industry relationships [Feller, 2005]. This and many other such key policy initiatives were discussed at a workshop organised by Case Western Reserve University, reported in detail in the document titled “Economic Development Through Entrepreneurship – Government, University and Business Linkages”. However, there are opinions expressed by researchers that a Bayh-Dole type of an Act might not have a similar positive effect if implemented in some of the developing countries, for various reasons that have been discussed elsewhere [So et. al., 2008].
A recent US Office of Science and Technology Policy (OSTP) report titled, “Universityprivate sector research partnerships in the innovative ecosystem”, presented in November 2008 by the Presidential Council of Advisors on Science and Technology (PCAST) details many of the policy initiatives adopted by the US government to support university-private sector research partnerships. The recommendations made in the report laid significant emphasis on changing policies in relation to R&D tax credit and other tax policies impacting innovation-related partnerships, developing educational tools about intellectual property and technology transfer practices and such other aspects. The Framework Programme (FP) in the EU, into its 7th Edition from 2007 till 2013, is responsible for framing the policy and providing financial support to research related activities across the EU. The Cooperation component of FP supports all forms of research cooperation, including joint research initiatives and international cooperation. A whole host of policy initiatives and a budget of ~ € 500 billion have been earmarked over the 6 year period to strengthen research capabilities across the EU.
3. The Indian Context:
Innovation in India is still in nascent stages, if the number of patent applications filed in 2005 by resident Indians, as shown in Figure 3, is to be taken as an indicator of innovation. The figure depicts the numbers of resident and non-resident patent applications filed, separately, and the % change in the number of patents filed compared to the previous year. The resident and non-resident numbers indicate that the Indian resident applications filed are just over 18 % of all the patent applications filed at the Indian Patent Office, numbering 4521 patents
[Courtesy - WIPO Statistics]. This is a significantly small number, compared to the number of resident patent applications filed by most of the developed economies.
According to studies, companies from developed economies participate in 99 % of R&D partnerships, with 93 % of them being amongst the US, EU, Japan and South Korea [Hagedoorn, 2000]. This indicates the tremendous scope for innovation as well as formation of SRPs in India.
Figure 3: Number of patents filed in various countries including India, in 2005.
During the last couple of decades, the Indian government has attempted to encourage technology innovation in the country, by means of developing a variety of initiatives, under the aegis of the Department of Science and Technology (DST), the Department of Scientific and Industrial Research (DSIR) and the Federation of Indian Chambers of Commerce and Industry (FICCI). These initiatives include formation of the National Science and Technology Entrepreneurship Development Board (NSTEDB), Technology Innovation Management and Entrepreneurship Information Service (TIME IS), with the objective of promoting
entrepreneurs and technology innovators, by means of creating an innovation ecosystem and several policies favorable to technology innovation.
Non-profit NGOs such as National Entrepreneurship Network have engaged themselves in educating students about entrepreneurship and innovation and providing useful resources to future entrepreneurs.
However, very little has been discussed in open literature about the importance of strategic research partnerships (SRPs) or about policy initiatives supporting formation of SRPs. The following few paragraphs discuss the Indian data and policy initiatives, as reported in open literature at global fora, which display slight inclination towards adopting SRPs as a means of fostering innovation in India.
The Indian presentation at UNESCO South Asian Regional Workshop on Science and Technology, held in November 2005, included details about findings based on S&T indicator data collected by Indian DST’s National Science and Technology Management Information Systems (NSTMIS). The methodology of surveys conducted to collect data is explained in brief detail, and the difficulties in collecting data including slow response times or no response, incomplete and/or inconsistent responses are reported with possible remedies.
An Indo-US symposium titled “India’s changing innovation system”, conducted by the US National Academies of Sciences (NAS) in June 2006 highlighted the need for a structured approach towards strategically positioning India’s R&D and innovation efforts. Top Indian policy-makers and scientists are reported to have participated in the symposium and significant bilateral strategic partnership agreements were discussed. Special emphasis was laid on formation of global partnerships, which could speed the transformation of new knowledge into products or processes or services, rather than restricting to partnerships within their respective nations.
In a 2007 World Bank report titled “Unleashing India’s innovation”, stresses the need for promoting more collaboration between small and medium industries, and also promote commercialization and strengthen links between industry, universities and public laboratories. The activities for such promotion include providing support to technology transfer offices, creating a patent management corporation, developing technology parks and
incubators, and improving India’s regime for intellectual property rights. The report also suggests that India should consider creating a Global Research and Industrial Partnership program to promote advanced R&D and commercialization efforts conducted jointly by domestic and foreign enterprises.
The Indian National Knowledge Commission’s (NKC) 2007 survey titled “Innovation in India”, which NKC claims could perhaps be the first in-depth quantitative and qualitative survey of innovation in India, which includes data collected from a whole range of large, medium and small enterprises in India. It is reported that SMEs have greater innovation intensity and firms partnering with government agencies, collaborating with universities and research laboratories tend to be more innovative.
According to the report, two of the most important external barriers to innovation, as perceived by both large firms and SMEs are: • • skill shortage due to the lack of emphasis on industrial Innovation, problem-solving, design, experimentation, etc. in the education curricula lack of effective collaboration with research in universities and R&D institutions, excessive government regulation as well as insufficient pricing power to derive value from innovations.
It is recommended in the report that there needs to be a synergistic use of cumulative energies of the industry, the government, the educational system, the R&D environment and the consumer and that the innovation ecosystem is a complex environment that requires the coordinated functioning of a number of diverse factors in order to function effectively.
In a draft of the National Innovation Act (NIA) passed in 2008, a chapter on Public-Private partnerships explains, though in very brief detail, the policy initiatives to be adopted to promote partnerships for innovation in India. They are as given below (verbatim):
1. The Central Government shall facilitate the establishment of an electronic exchange or a physical market place for commercialization of information on or the results of Innovation, including any statutory or non-statutory rights in intellectual property arising in connection with or as a consequence of Innovation.
2. The Central Government shall facilitate small and medium scale enterprises by fiscal policy changes or government directions for financial institutions regulated by the institutions regulated under the Reserve Bank of India Act or as Non Banking Financial Corporations for developmental finance for facilitating Innovation which inter alia could provide for concessional rates of interest.
3. Special rules and procedures shall be made for facilitating maintenance of confidentiality and secrecy whilst promoting transfer or licensing of Innovation for its commercialization. The draft of NIA also mentions some of the facilitating measures to be adopted to foster innovation, including tax exemptions to SMEs for commencing R&D and commercialization, formation of Special Innovation Zones, and providing other fiscal incentives to promote fruitful research partnerships and commercialization leading to innovation.
Interested readers are strongly encouraged to refer to the above reports to get more details on the brief explanations given above.
4. Recommendations and Conclusions:
Going by details available in open literature about global and local trends in technology innovation and role that SRPs play in improving the performance of the innovation ecosystem, the author strongly feels an immediate need to spread awareness about the advantages of SRPs among entrepreneurs and create a national knowledge bank that assists entrepreneurs in gaining access to necessary resources in this regard. Following are some of the recommendations based on the author’s understanding of the situation at hand: •
Educating and effectively engaging the entrepreneurs in the activity of data gathering and dissemination, to achieve response rate maximization and response time minimization.
Organize national and international-level workshops to bring together universitybased researchers, industry leaders and public policy-makers, for them share the knowledge on innovation and the importance of its indicators, and effectiveness of national and global research partnerships.
Implement the policy changes and planned facilitations as proposed in the National Innovation Act 2008, on a priority basis. Constantly upgrade the innovation ecosystem, based on feedback received from all concerned parties.
In conclusion, the author feels that there is tremendous scope for improving the innovation ecosystem in India and SRPs play a key role in this regard. Data indicators assist entrepreneurs in making better informed decisions on suitable partnerships, rather than forming partnerships on an ad-hoc basis and hence the data gathering needs to be more systematically approached. Policy initiatives need to be reviewed on a regular basis, and any necessary changes need to put in place as and when necessary.
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Feller I. (2005) “A historical perspective on government-university partnerships to enhance entrepreneurship and economic development” Economic Development through
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