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MCRI Theme I: Social Nature of the

Innovation Process (SNIP)

Charles H. Davis, Ph.D.Faculty of Communication & Design

Rogers Communications CentreRyerson University, Toronto

Innovation Systems Research Network4 May, 2006

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• Review:– Main hypothesis and research question– Our starting points regarding the social

nature of the innovation process• Challenges and opportunities

– Theory– Analytical Method– Practice

• An overview of the SNIP Interview Guide 1.1

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Main hypothesis and research question

• The social characteristics of a city-region have now become its principal economic assets– How do the social characteristics and

processes of city-regions determine their economic dynamism and vitality as centres of innovation and creativity?

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Starting points: social nature of the innovation process 1

• Knowledge and learning are central features in the process of creation of economic value

• Innovation is social organized and interactive

• The meso-level (region) is the key site of innovation because of the importance of proximity in exchanges of tacit knowledge

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Starting points: social nature of the innovation process 2

• Institutions shape flows of knowledge– Institutions may be national (or

international, regional, or local)

• Local agglomerations have global knowledge pipelines

• City-regions are advantaged by their diversity and size

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Challenges & opportunities: SNIP theory 1

• Marshall or Jacobs?– Marshallian geographical specialization

• Localization economies increase with the number of co-located firms

• Proximity favors intra-industry knowledge flows• Prevailing models such as the Porter Diamond

seek to describe the structure of geographically specialized clusters:

– Co-location of suppliers, principals, customers, rivals, and supporting institutions favors interactive learning and flows of knowledge

• Geographically specialized industry, by definition, services external markets

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Challenges & opportunities: SNIP theory 2

• Marshall or Jacobs?– Jacobs says that diversity, not

specialization, provides the critical externality• Empirical evidence for urbanization

economies is inconclusive• But industries cannot trade

indiscriminately with other industries

– The keys to urbanization economies may be ICTs, services, and cultural industries

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Challenges & opportunities: SNIP theory 3

• Marshall or Jacobs?– ICTs are “general purpose

technologies” and they service all sectors

– Current wave of ICT-enablement is in the service and cultural industries, which are highly concentrated in urban regions• Financial services, government,

healthcare, media and other creative industries

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Challenges & opportunities: SNIP theory 4

• Marshall or Jacobs?– Note the importance of localized

inter-sectoral value creation processes in the Jacobs model

– However, service industries and creative industries are also highly concentrated, suggesting that Marshallian dynamics and Jacobean dynamics may be at play.

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Challenges & opportunities: SNIP theory 4

• Marshall or Jacobs?– What are the social processes of innovation

in the Jacobs model?– “creative industries” have particular

characteristics that may presage coming organizational forms in other industries

• Customer experience is the goal (utility is not the only value)

• Constant innovation at high risk• Constant challenge to integrate business and

creative knowledge• Cult of youth and cult of the celebrity

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Challenges & opportunities: SNIP theory 5

– “creative industries” have particular characteristics that may presage coming organizational forms in other industries• Highly concentrated industry and a vast sea

of contingent labour and micro-enterprises• Portfolio careers• Turmoil due to disruption of business

models and distribution channels by ICTs• High levels of uncertainty• Haphazard innovation support system

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Challenges & opportunities: SNIP theory 6

• The functional specialization hypothesis (Duranton & Puga)– ICTs enable business functions to be coordinated

remotely– Functions can be located wherever it makes business

sense to locate them• Customer service and back office functions are located

where labor is inexpensive• Production is located where the economics of supply,

transportation, and markets dictate• Executive functions located in major metropolitan areas• Where to locate creative & R&D functions?

– ICT-mediated linkages can interpreted in terms of institutional, cultural, cognitive, or other kinds of proximity

– Note: dispersed business functions CANNOT be tracked via NAICS codes

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Challenges & opportunities: analytical methods

• How to operationalize these key concepts:– Knowledge and knowledge flows– Learning– Creativity

• Maybe also:– Spillover– Untraded interdependencies

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Challenges & opportunities: analytical methods

• How to extend our analytical toolkit– Qualitative research -> grounded

theory?– Survey research -> economic

performance as the dependent variable?

– Social network analysis?– Other methods (ethnography,

cognitive mapping?)

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Challenges & opportunities: practice

• How can our research help to improve these key innovation practices?– Public innovation support– Policy planning and coordination– Education– Firm-level innovation practices

• Strategy • Product innovation• Business development & marketing

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Overview of the SNIP interview guide

• This interview guide has 3 sections– 1) firm-level innovation– 2) Appendix A: firm fact sheet– 3) Appendix B: R&D linkages with

universities or public research organizations

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1) firms

1. Location and contact information2. What are the firm’s main products or

services?3. Workforce

1. Characteristics of manager2. Characteristics of employees

1. Directors, supervisors, professional/technical workers, creative workers, administrative workers, unskilled workers

2. % of employees, % with university degrees, % hired in past 3 years, % who were recruited from outside the city in past 3 years

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1) firms

4. Innovation1. % revenues from recent products or

services2. Challenges faced by most recent product

or service introduction3. Estimate % of expenditures devoted to

various innovation activities [list]4. Sources of most advanced technology

used by the firm5. IP practices6. Licenses from public institutions

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1) firms

5. Customers and competition1. location of important customers?2. Sources of competitive advantage –

top three from list of 21; describe what firm has done

3. Location of major competitors?4. Intensity of competition locally,

nationally, internationally?

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1) firms

6. Knowledge flows6.1 script: please think about 3 firms [or other

innovation players] with which your company has regular relationships about important matters during the past three years

• Of these three, select the one with the MOST FREQUENT contacts

• Are the contacts mainly formal or mainly informal (describe)

• What is most frequently discussed (from list)• What type of information is generally exchanged?

(from mainly unwritten to mainly written information)

• Repeat procedure with firms #2 and #3

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1) firms

7. Interactions with public R&D institutions

1. How does partnering fit into firm’s R&D strategy?

2. Has the firm worked on any projects with public institutions or universities? (If yes, go to appendix B)

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Appendix A: firm fact sheet

• % employment change (3 years)• Ownership; % residing in Canada• 2005 revenues of business unit• % revenue growth (3 years)• Projected revenue growth, next 3

years• Market distribution: % of sales in

province, Canada, US, other international

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Appendix B: R&D linkages with universities or public research

organizations

• What types of interaction?• Who interacts?• What kinds of exchanges?• What are most successful methods

for transferring knowledge and technology to firms?

• Table of benefits to industry partner and to the university (list of about 15 possible benefits)

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The end.

Thank you!Questions or comments?