Sectoral Patterns of Technical Change
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1 Sectoral Patterns of Technical Change Chapter 7, Miozzo, M. & Walsh, V., International Competitiveness and Technological Change, Oxford University Press.
2 Overview Introduction Why should we classify sectoral patterns of technical change? The classification of patterns of technological change Understanding of how innovation works in various sectors (Services, construction, pharmaceutical, argofood industry, chemicals) Conclusion
3 Classifying Sectoral Patterns of Technical Change Firstly Why do we need to classify? Because of INNOVATION S CHARACTERISTICS Knowledge applied by firms have a specific use and purpose Firms vary as to how they rate the importance of product and process innovation
4 Classifying Sectoral Patterns of Technical Change The sectoral systems literature Seeks to understand and compare the sources and patterns of technological change in different industries This led to wider lessons regarding the relation between innovation and the economy
5 Classification of Patterns of Technological Change Developed by Pavitt (1984) Suggested that it includes 3 categories Supplier dominated firms Production-intensive firms Science-based firms
6 Classification of Patterns of Technological Change Supplier Dominated Firms Found in traditional sectors of manufacturing Small, weak in-house R&D and engineering Minor contribution to their process of product technology Innovation comes from their suppliers
7 Classification of Patterns of Technological Change Productive-Intensive Firms Produce standard materials and durable consumer goods Technological skills : Used to exploit scale economies Science-Based Firms Sectors of chemicals, pharmaceuticals and electronics Main source of technology : R&D activities
8 Classification of Patterns of Technological Change Revised by Pavitt (1991) Added : Information Intensive category Integration of radical technological advances into products and production systems Specialization of their production
9 Innovation in Services Considered as a residual category Neglected in studies of innovation Lagging behind other sectors Pavitt (1984) regarded it as supplier dominated firms Barras (1986) regarded it differently : Service are heavy users of technology
10 Innovation in Services Soete and Miozzo (1989) regrouped services into 3 categories : Supplier dominated firms Scale-intensive physical networks sectors and information network sectors Science-based and specialized supplier firms
11 Innovation in Services Factors that influence theories to develop innovation in services Intangibility & client intensity Barras (1986) developed reverse product cycle as a theory of innovation Describes the innovation process in what its called user industries
12 Innovation in Services Barras (1986) - Reverse Product Cycle Transmission of new technology from capital goods sector (production starts here) to user sector (which it is applied) starts with back office Back office Process improvements to increase the efficiency of delivery of existing services to process innovation to improve service quality and leading to production innovations through generation of new services
13 Innovation in Construction Peculiar characteristic : Physical characteristics, one-off designs and lack of prototyping, production and innovation take place at client s premises, separation of design process and production, etc. Concern : For academics and productivity and quality problems and failure to attract and retain skilled, motivated staffs
14 Innovation in Construction Although Pavitt (1984) grouped in as supplier dominated No absence of major technological developments since 1950s
15 Innovation in Construction Question : Is construction an industry or a process? Some say it is not an industry More attention has to be given to the contruction project Others said it should be viewed as a process But all agreed that is involves different industrial sectors working together
16 Innovation in Construction Two issues to highlight in study of construction innovation : Particular structure of ownership and management may general more appropriate institutional conditions to support the commitment to irreversible investment in innovation Reveal the importance of relationship between agent in the process of innovation
17 Innovation In Pharmaceuticals - More than 15% of sales spend on R&D - Represents a large proportion of some European countries R&D - Sector is made many small firms with small number of oligopolies. R&D concentrate in large firms - Search process for new drugs is strongly influenced by advances in biotechnology & IT
18 3 Paradigms 3 paradigms in drug discovery, associated with 3 different organizational forms for the innovating firm First based on the extrac2on of alkaloids and other ac2ve substances from natural products, which are commercialized by pharmacies. Second involve the synthesis of chemicals, most of which did not already exist in nature, by large chemical firms using extensive resources and R&D Third based on the exploita2on of a combina2on of biotechnology, genomics, protomics, mathema2cs, sofware design, computer engineering & bioinforma2cs.
19 Intellectual rights in pharmaceutical They are designed to encourage inventors by ensuring that they can benefit from their discoveries and investments Allow firms to have monopoly & charge monopoly prices Ensure that the profit from innovation accrues mainly to the shareholders of the firm. Patenting is an effective means of intellectual property protection.
20 Concept of selection environment Captures the idea of the environment into which an innovation is launched and whether it will succeed Firms have to prove their new products safety and efficacy, in order to get a license to sell them from a national licensing authority. In order to keep profits high & recoup the costs of R&D, firms have to consistently introduce new products into the market. High prices are charged for patented drugs but once the patent has expired, other firms may make the drugs & sell them at lower prices.
21 Innovation in the agrofood sector Contains several industries with activities in primary products, manufacturing & services Firms buy seed firms to do R&D and to produce seeds that were compatible with the use of their pesticides Includes a range of acitivities from the traditional to the high technology GM food is an activity within the high-tech and science-based biotechnology
22 Retailers decide what to stock and promote to public. They are crucial to the market demand. There are demand for processed food among urbanized consumers in industralized countries In advanced countries, there is a growth of fast food and natural food. Food and beverages industry is considered a lowtech industry, but growth is dependent on the firm s ability to innovate.
23 Some F&B firms patent an invention and do not innovate again. Sometimes food companies collaborate with innovation suppliers to acquire customized products or techniques like packaging & etc. Some important innovations are transporting and preserving perishable goods and reducing time in storage.
24 Innovation in chemicals They are facing declining returns in discovering new molecules using knowledge and method available. New technology were not always perceived as opportunities but threats. - They are commercialized by new entrants - They have the potential of destroying the chemical firms competencies
25 Response to chemical firms challenges Chemical and related products industry faced challenges on both supply and demand. In response. - They changed the emphasis of their R&D and buy firms with desired specialisms. - This can strengthen their existing business or move into it.
26 Conclusion Differences across countries in sectoral systems are important and have affected the economic performance of different countries.
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