Why is Oslo not Innovative? A Review of the Constraints & Challenges

PD Phil Cooke, Director, Centre for Advanced Studies, Cardiff University;

Development Studies, Aalborg University; & Management School, University of Florence

Competitiveness 2009-10Sources: WEF Global Competitiveness Report, 2010-2011 and

IMD World Competitiveness Yearbook 2011

Ranking WEF Competitiveness WEF Competitiveness IMD Competitiveness 2010 2009 2010 Switzerland 1 1 5 Sweden 2 2 4 Singapore 3 3 3 USA 4 4 1 Germany 5 5 10 Japan 6 7 26 Finland 7 6 15 Netherlands 8 8 14 Denmark 9 9 12 Canada 10 10 7 Hong Kong 11 11 1 Ukraine 12 13 57 Taiwan 13 12 6 Norway 14 14 13 France 15 15 29 Australia 16 16 9

European Innovation Performance Source: Innovation Union Scoreboard (IUS) 2010 (SII Summary Innovation Index)

Sweden 75 Denmark 73 Finland 70 Germany 68 UK 65 Belgium 63 Austria 59 Netherlands 58 Ireland 57 France 54 EU 52 Iceland 49 Slovenia 48 Estonia 47 NORWAY 46 Portugal 44 Italy 43 Czechia 42 Spain 39 Greece 37 Hungary 34 Croatia 30

European Union Innovation ScoreboardSource: The 2007 Summary Innovation Index (SII)

EU Interpretation of Innovation Groupings

• Estonia, Australia, Norway, Czech Republic, Slovenia, Italy, Cyprus and Spain are the moderate innovators with

SII scores below that of the EU27.

• Sweden, Switzerland, Finland, Israel, Denmark, Japan, Germany, the UK and the US are the innovation leaders, with SII scores well above that of the EU27 and most other countries. Sweden has the highest SII of all countries, but its leading position is mostly based on strong inputs.

• Luxembourg, Iceland, Ireland, Austria, the Netherlands, France, Belgium and Canada are the innovation followers,

Technology Intensity in Total Value Added by SourceSource: OECD

Technology Intensity

• This means that countries are ranked according to total business technology intensity

• Table shows that the share of own R&D activity of business enterprises is about one-half of the total business R&D content in countries with a relatively high level of GDP per capita

• It is below this share in countries with lower level of income.

Norway’s GDP to Innovation is a low Ratio

• The ration of GDP level to innovation performance is moderate

• For unclear reasons high GDP is not translated into high innovation

• This can have three sources:– Low investment of high GDP by business in innovation– Low government investment in innovation– Low production of innovation by other institutions e.g.

universities

• On investigation of the input-output ratio of Norwegian effort seems to give poor returns

• All countries spend more on inputs than they get back in innovation outputs,

• However, Norway gets a bit less than half the investment in innovation returns

• Other countries, nearer the top of the performance range e.g. Switzerland and Germany, get more innovation input for output

Selected European Knowledge Economy Disparities

Region >40% Knowledge Economy Region <40% Knowledge Economy EU Position EU Position Stockholm (S) 58.65 (1) Gelderland (NL) 39.99 (91) London (UK) 57.73 (2) Düsseldorf (G) 39.37 (104) Gothenburg (S) 53.70 (3) Väli-Suomi (Fi) 39.10 (105) Gilf’d-Bri’t’n (UK) 53.17 (4) Hannover (G) 38.27 (109) Bergen (NO) 52.42 (6) N.E. Scotland (UK) 38.09 (110) Oslo (NO) 52.23 (7) Namur (BE) 37.70 (112) Trondheim (NO) 52.10 (9) Lombardia (I) 37.55 (114) Helsinki (Fi) 51.50 (14) Liguria (I) 37.35 (115) Paris (Fr) 50.17 (15) N. Ireland (UK) 37.31 (116) Stavanger (NO) 48.76 (22) Pais Vasco (E) 36.30 (119) Utrecht (NL) 47.49 (29) Emilia-Romagna (I) 35.22 (130) Denmark (DK) 47.46 (30) H. & Islands (UK) 34.45 (136) Edinburgh (UK) 47.05 (33) Cataluña (E) 33.48 (141) Wales (UK) 43.39 (59) Navarre (Sp) 32.06 (149) Dublin(IR) 40.18 (89) Aegean Islands (Gr) 12.70 (192) Source: Cooke & De Laurentis (2002) EU Knowledge Economy Index, Cardiff, Centre for Advanced Studies

Interpreting Knowledge Economy Indicators

• Knowledge –intensive business services plus high tech manufacturing

• Oslo and Norway’s other main cities have very high KIBS ratios

• All cities and regions have much smaller HTM than KIBS• KIBS are not occupations but sectoral employment,

(e.g. banking, administration, management, consultants)• Many such posts are routine rather than ‘innovative’

Oslo’s Innovation Advantages and Challenges

• Karlsson 2001, Isaksen, 2003 and Aslesen 2007 found Oslo to be competitive, export-minded and innovative in software engineering

• In software, Oslo was more export and innovation-minded than Stavanger or Trondheim

• Characteristic of Oslo software were some university Internet start-ups, venture capital and consultancies selling services to larger Oslo firms

• Oslo had no greater intensity in R&D investment than some medium cities on turnover from exports and percentage of turnover invested in innovation

Oslo’s Challenge

• Could it be that Oslo’s innovators occupy ‘bloody red water’ of high competition for low margins?

• We know Oslo suffers from high overhead costs, so can enjoy only limited innovation margins except in very high value-added activity

• Notice the ‘smiling curve’ of added value in the following slide

The ‘smiling curve’ of added value in ICT Global Innovation Networks (GINs)

Synthetic Design

Symbolic Design Contract Manufacturing

ElectronicContract Manufacturing

Original Design Manufacturing

Flagship Markets

GIN-TIS

Value

Cambridge TIS, ARM, CSR Chip Design

‘Apps’ Design, Silicon Valley, ‘Silicon Roundabout’, Toronto, Malmö

Original Design Manufacture TIS Mediatek, Taiwan

Contract Manufacturing Platform, ‘World Factory’, Shenzhen, Dongguan, Shanghai

Electronic Contract manufacturing, Guangdong

Flagship Marketers, Apple, Google ‘Android’, Silicon Valley, Taiwan,Seoul, South Korea,

• Territorial Innovation Systems In ICT GIN

• Chipset Design & Advanced GIN Logistics

How did the ‘smiling curve’ happen?

Principal: e.g. Apple, SonyEricsson, HP, Nokia

Agent: e.g. ‘World Factory’ Contract Manufacturing Platform @ Foxconn, Celestica, Sanmina, Flextronics & Shenzen, Dongguan platforms

Agent: e.g. Advanced Embedded Software & Systems @ ARM, Autonomy CSR, & Cambridge Platform

Agent: e.g. ‘Apps’ UX-UI, LBS @ TAT, Polar Rose & Malmö, Ottawa, Silicon Valley Platforms PPlatformsPlatformsPlatforms

Sub-Agents: EMS (Electronic Contract Manufacturing), e.g. PCBs, Cables, PC Parts, Metals

Sub-Agents: ODM (Original Design Manufacturers) e.g. Compal, Arima, Hong Hai @ Taiwan

Västra Götaland region’s ‘Iconic Projects’ resilience to ‘eco’ and ‘healthcare’ shocks

RenewableFuels

Forest Plastics

Auto Safety

Medtech

Green-shipping

Petroleum & Health

Recycling

Environment

SustainableCity

Tunnel Infrastructure

Visioning

Recycling Green Logistics

Green Procurement

Goteborg BIO

ICT

Healthcare

Smart Textiles

Pharma

Medtech

Health Imaging

DigitalSignals

Processing

Biodiagnostics

GU/CH Research

Complex Systems: What’s Going On?

• Regional Innovation Systems are helping firms find innovative partners outside their sector

• Innovative firms are seeking ‘relatedness’ from ‘strange attractors’

• Policy ‘emergence’ from below up to the global (Gothenburg model of Lisbon Agenda)

• Innovation by Cross-pollination• Inkjet printer now used in Clothing, Ceramics,

and Shoes clusters/industries

Discussion & Conclusions

• Norway is wealthy in narrowly specialised fields• These are related, too, but are big and

independent, oil, offshore engineering, shipping, energy

• Innovation comes from ‘recombination of knowledge’ (Schumpeter)

• Innovator city-regions are ‘thinking laterally’ not only ‘vertically’