Innovation Intermediaries

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1 Innovation Intermediaries Jeremy Howells

2 Outline Phase I 1. Introduction 2. Overview of existing research 3. Intermediation as a function 4. Intermediation and innovation 5. Conclusions Phase 2 6. Role of intermediaries in innovation networks

3 1. Introduction: I The research: ESRC funding with CERAM Focus on CERAM, but led to enquiry of its current and future roles and activities In turn, led to discussion of the role of an innovation intermediary. What does it mean or should mean? Analysis centred on activities and processes, less on networks Focus on the organisation, but has implications for the innovation system

4 1. Introduction: II CRIC/PREST There is also a wider but fundamental issue here that, I believe, is very important. namely we have a very crude and imperfect vision of the actors within innovation systems. OECD only recognises four main groups for R&D: Firms; Universities and other Higher Education Institutions (HEIs); Public Research Establishments (PREs); Not-for-Profit Research Organizations This is a very crude simple taxonomy. Moreover makes no acknowledgement of newly emerging types of actors

5 1. Introduction: III Long history: Role of intermediary in innovation and technological development can be traced back to middlemen in the agricultural, wool and textile industries of sixteenth, seventeenth and eighteenth century Britain. These middlemen not only plied their trade, but were important informal disseminators of knowledge about technical improvements in agriculture, cloth making and in the collection, separation, carding and spinning of wool.

6 1. Introduction: IV CRIC/PREST Early use of intermediary - Watkins & Horley (1986) Interestingly they took a more prospective look into what intermediaries might do to help the technology transfer process between large and small firms as part of a policy initiative. Identified role intermediaries could play in: identifying partners in the first place; helping package the technology to be transferred between the two firms; selecting suppliers to make components for the technology; and, providing support in making the deal between the firms concerned.

7 2. Existing Research CRIC/PREST Four main literature fields: 1. technology transfer and diffusion 2. innovation research on the role and management of such activities and the firms supplying them 3. the systems of innovation and innovation networks 4. research into service organisations and more specifically Knowledge Intensive Business Services (KIBS) firms

8 2. Technology Transfer and Diffusion Early studies (Hägerstrand 1952; Rogers 1962) realised that change agents had a powerful influence on diffusion speed and uptake of new products/services by households and firms. Initial significance of third parties seen in their information dissemination (and therefore their impact on adoption rates within a diffusion community). Mantel and Rosegger (1987) highlighted other roles: support in decision-making of whether to adopt or not; as a specification writer or standard setter; and as an evaluator of the technology once it was in the market.

9 2. Innovation Research and Management Closely related to first, although focus different Instead of highlighting the role of intermediaries in the diffusion and technology transfer process, here the analysis is more about intermediaries as organisations and what type of activities they are involved in. Hargadon and Sutton (1997) study of a technology broker (IDEO, a U.S. design consultancy), stress that brokering is more than just a linking role, but also helps transform the ideas and knowledge being transferred. Role of broker as a knowledge repository whose knowledge its workers use to provide solutions that are new combinations of existing ideas to their clients.

10 2. Systems of Innovation and Innovation Networks Systems literature also recognised intermediaries. Stankiewicz (1995; Carlsson and Stankiewicz 1991) re. industrial automation in Sweden They identified the role of intermediary firms that help adapt specialized solutions on the market to needs of individual user firms.

11 2. Systems of Innovation and Innovation Networks On a broader level, Stankiewicz also recognises the existence of bridging institutions that help link players within a technological system. Lynn et al. (1996, 97) - innovation communities - also identify a group of organisations that help to link and transform relations within an innovation network/system. These types of organisations would form what they term as superstructure organisations.

12 2. Service Organisations and KIBS Many KIBS firms have close and continuous interactions with their clients which can involve crucial, but largely hidden, functions in supporting innovative change within their client companies (Miles et al. 1995; Wood 2002; Bessant and Rush 1995). In turn, increasing role of KIBS organisations in the wider innovation system (Howells 1999; Czarnitski and Spielkamp 2000; Muller and Zenker 2001). Czarnitski and Spielkamp (2000) identify the role that business-related services play as bridges for innovation to other manufacturing and service firms.

13 3. Definition: Innovation Intermediary An organization or body that acts an agent or broker in any aspect of the innovation process between two or more parties. Such intermediary activities include: helping to provide information about potential collaborators; brokering a transaction between two or more parties; acting as a mediator, or go-between, with bodies or organizations that are already collaborating; helping to find advice, funding and support for the innovation outcomes of such collaborations. Definition seeks to include other terms that have been used to describe such processes - third-party or broker.

14 3. The Functions of Innovation Intermediaries? 10 main functions: 1. Foresight and diagnostics 2. Scanning and information processing 3. Knowledge processing and combination/recombination 4. Gatekeeping and brokering 5. Testing and validation 6. Accreditation 7. Validation and regulation 8. Protecting the results 9. Commercialisation 10. Evaluation of outcomes + 28 sub functions

15 3. Types of Intermediary CRIC/PREST 1 Foresight and diagnostics a) Technology foresight and forecasting b) Articulation of needs and requirements 2 Scanning and information processing a) Scanning and technology intelligence b) Scoping and filtering 3 Knowledge processing, generation and combination a) Combinatorial b) Generation and recombination 4 Gatekeeping and brokering a) Matchmaking and brokering b) Contractual advice 5 Testing, validation and training a) Testing, diagnostics, analysis and inspection b) Prototyping and pilot facilities c) Scale-Up d) Validation e) Training

16 3. Types of Intermediary 6 Accreditation and standards a) Specification setter or providing standards advice b) Formal standards setting and verification c) Voluntary and de facto standards setter 7 Regulation and arbitration a) Regulation b) Self-regulation c) Informal regulation and arbitration 8 Intellectual property: protecting the results a) Intellectual property (IP) rights advice b) IP management for clients 9 Commercialisation: exploiting the outcomes a) Marketing, support and planning b) Sales network and selling c) Finding potential capital funding and organising funding or offerings d) Venture capital e) Initial Public Offering 10 Assessment and Evaluation a) Technology assessment b) Technology evaluation

17 4. Intermediation and Innovation: I The functions of an innovation intermediary are more numerous and diverse than previously implied. The number & diversity widening along the innovation value chain as organizations providing such functions: a) move upstream (scoping and intelligence) or downstream (IP protection and commercialisation) in relation to the innovation chain into new roles, illustrated by such organizations as BSI, Scipher or Generics;

18 4. Intermediation and Innovation: II b) diversify into new industries or technologies, explified by CERAM, QinetiQ or SIRA; and/or c) shift into new markets overseas, such as that taken by BMT and QinetiQ. De facto assumption that intermediaries operate on a simple triadic one-to-one-to-one basis this needs questioning (see later Phase 2)

19 4. Intermediation and Innovation: III Also assumed that it is the supplier that initiates and uses the intermediary to help supply customers with a new innovation (i.e. that the implied interaction is technology push and often manufacturing-to-service led). However, increasingly customers are becoming more proactive here. CERAM, for example, was approached by IKEA, the large multinational Swedish retail company with extensive global operations, which was being supplied by low cost ceramics manufacturers in central and eastern Europe but found that its pottery had a very high fracture and breakage rate.

20 4. Intermediation and Innovation: IV However, intermediaries are also becoming more proactive, initiating contacts, ideas and solutions Linked to the above, innovation intermediaries are, therefore, not only providing immediate, one-off intermediary services to their clients, but are also seeking to offer longer term, relational innovation capabilities to them as well. These collaborations can last for periods of years, not months. They also provide opportunities for the intermediaries to get to know their clients better as well as to gain more lucrative, value-added contracts.

21 5. Conclusions: I Certainly, although organizations providing such intermediation functions tend to remain specialised around particular activities, the range (scope) of services being offered does appear to be increasing over time. There is some evidence, given the caveat noted above, to suggest innovation intermediation as an activity (scale) has grown over time (further fragmentation and division of labour in knowledge activities).

22 5. Conclusions: II The study has revealed that intermediaries provide a much wider, more varied and holistic role for their clients in the innovation process than has generally been acknowledged. Associated with this, there is also a much wider range of innovation intermediation functions than has been usually considered.

23 6. Intermediaries in Innovation Networks Phase 2 Really only just begun.... focused on functions and the nodes or actors, very little about links and networks (systems).. Important issues about the role of actors in the network or system here as well

24 6. Intermediaries in Innovation Networks i) Network topology ii) Network constitution iii) Role in the network iv) Impact of intermediaries

25 6. Intermediaries in Innovation Networks i) Network topology: As noted earlier, assumption that intermediaries operate on a simple one-to-one-to-one basis (vertical relationship) However, in distributed innovation systems, intermediaries are increasingly involved in more complex relationships, such as many-to-one-to-one, one-to-one-to-many, many-to-one-to-many, or even many-to-many-to-many collaborations, forming both vertical/horizontal relationships in distributed networks.

26 6. Intermediaries in Innovation Networks 1 2 3

27 6. Intermediaries in Innovation Networks 4 5

28 6. Intermediaries in Innovation Networks 6 7

29 6. Intermediaries in Innovation Networks ii) Network constitution: Although intermediaries are used to working in large supplier consortia (linked to historic origins in UK of some intermediaries as former Industrial Research Associations) also involved in multiple customer consortia and multiple intermediary collaborations.

30 6. Intermediaries in Innovation Networks ii) Network constitution: Latter, more recent types of collaboration expanding with, e.g. CERAM s materials modelling subsidiary, CSMA, entering in a joint venture with TWI, to offer a unified set of services to clients in relation to materials characterisation and analysis. Power dependency: more clients intermediary has, the more power the intermediary likely to have over any particular client (Braun 1993)

31 6. Intermediaries in Innovation Networks iii) Role in the network and methodological issues Also issue of When is an innovation intermediary not an innovation intermediary? Innovation intermediaries often not only involved in providing mediated innovation services linking their clients with other organizations, but also supplying services direct to their clients on a one-to-one basis, which involved no other interaction with other organizations.

32 6. Intermediaries in Innovation Networks When are you an innovation intermediate? 100% Intermediate activities 60% Intermediate activities? 30% Intermediate activities?

33 6. Intermediaries in Innovation Networks iii) Role in the network and methodological issues It is apparent that the most prevalent role of the intermediaries surveyed is in the knowledge generation and combination/recombination roles (function 3) This in turn has undoubtedly grown out of their traditional contract research and technical activity working directly with clients on a one-to-one basis.

34 6. Intermediaries in Innovation Networks iii) Role in the network and methodological issues This is not only in terms of improving connectedness within a system, particularly through bridging ties, but also in its proactive, animateur role of creating new possibilities and dynamism within a system.

35 6. Intermediaries in Innovation Networks iv) Impact of intermediaries on the innovation network and overall innovation system: Assessing the impact of innovation intermediaries is also going to be difficult, given their indirect (and intermediate) effect on a business s value chain, but the growth in the number and range of these actors within the system belies the benefits they create to their clients and to the innovation system overall. Impacts: organisation-specific impacts on innovation for client firms or organisations, but also systemic impacts across the network or system

36 6. Intermediaries in Innovation Networks iv) Impact of intermediaries on the innovation network and overall innovation system: However, even here we need to take care. In the Netherlands, the very richness and success of the intermediary level within the overall science system is seen as potentially creating institutional inertia, which may result in problems for the strength and vitality of the system in the longer term (Van der Meulen and Rip 1998, 768).

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