Technology Extension Concepts and Impacts Jan Youtie 1 World Bank BBL Seminar Series Washington DC April 23, 2015 1. Georgia Institute of Technology, Atlanta,

Technology Extension Concepts and Impacts

Jan Youtie1

World Bank BBL Seminar SeriesWashington DC April 23, 2015

1. Georgia Institute of Technology, Atlanta, GA, USA

Email: [email protected] | stip.gatech.edu | Twitter: @JanYoutie

Overview

1. Introduction – What is Technology Extension2. Why are Technology Extension Services

important? 3. Service examples – How and When?4. Positioning and Strategy – Where and with How

much impact?5. Practices and Characteristics6. Key Insights

21. Introduction

Recent Studies

21st Century Manufacturing: The Role of the Manufacturing Extension Partnership

National Academy, National Research Council, Washington, DC, October 2013.

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Impact of Technology and Innovation Advisory Services P. Shapira, J. Youtie. Compendium of Evidence on the Effectiveness of Innovation Policy Intervention. NESTA and Manchester Institute of Innovation Research, December 2013

Institutions for Technology Diffusion: Technology Extension Services – Operation, Cases and Insights

P. Shapira, J. Youtie, et. al., Manchester Institute of Innovation Research and Georgia Institute of Technology. Inter-American Development Bank. 2015 (forthcoming)

http://bit.ly/tech-ext

Current Studies

Technology Extension Services• Advice and expertise offered directly to enterprises to improve

technology use and innovation • Linked with management strategy, R&D, training, financial

support, marketing, supply and customer relationships• Targets – often SMEs in manufacturing, but also other types of

firms• “Real services” (Bellini) - engage directly with companies to

transfer knowledge and stimulate learning using nonfinancial means

• Diverse forms - also known as “industrial extension” or “innovation advisory services” and can be a component of “business support services” and “applied technology centers.”

1. Technology Extension: What

WHAT?

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Why Technology Extension?

Why Technology Extension needs greater attention: R&D and patenting alone are insufficient: Most firms do not do R&D, invention

does not mean innovation. Technology diffusion: Economic growth and development is related to the

widespread deployment of technology (from own R&D or via knowledge or capabilities brought into a firm or innovation system).

Absorptive capacities: Development is also related to the effective use of technology – requires building up capabilities of people, firms and innovation systems to learn about, use, and improve upon technology

Trade and Competitiveness: Spread of free trade and liberalized markets means that technology-lagging firms can no longer be so easily protected.

2. Technology Extension: Why

Why?

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Technology Extension Services can be overlooked as policies focus on advanced R&D and selected high technology targets.

There is a case for greater emphasis and integration of Technology Extension Services in the innovation policy mix

The Industrial Future? Faster, more responsive and closer to customers

– Mass personalization, distributed production, new technologies and materials, digitalized value chains

New markets, new competition– Market opportunities in emerging economies yet also increased competition

for developed economies from capable emerging economies Attention to resilience and sustainability

– Supply volatility, competition for resources, climate change, regulation, consumer eco-pull, life cycle

Dependent on highly skilled workers and managers– Skill and competence will be in demand in context of demographic change,

competition for skilled personnel Integrated value creation

– Integration of manufacturing supply chains, user demand, public-private manufacturing support landscape

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Adapted from The Future of Manufacturing, Government Office for Science, London, 2013

The SME Foundation Technology Extension is often targeted to SMEs (Small and Medium-

Sized Enterprises) SMEs comprise the majority of business enterprises in almost all

economies– SMEs are key elements in supply chains, also important in driving innovative

regional clusters– SMEs typically lag in productivity, use of technology, wages, competiveness

Key trends shaping SMEs– Open innovation (Chesbrough 2003)– Flexible specialization (López-Estornell et al 2012, Molina-Morales and Mas-

Verdu 2008)– Globalization and offshoring (Houseman 2006)

Innovation and SMEs and modernization– Many SMEs unable to modernize, develop capabilities, to fully engage in new

pathways for development and innovation

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Technology Extension Services:

Rationales for InterventionMarket failures

– Demand-side: SMEs lack information, knowledge, resources to implement modern methods and new technologies

– Supply-side: Large customers, vendors, consultants don’t or can’t support SMEs; Trade associations weak

Government and service failures– Gaps in public service provision for SMEs

Strategic concerns – Economic competitiveness – maintaining jobs while growing wages; – Rebalancing, expanding exports– Develop supply-chains and clusters, for new rounds of technological

growth– Foster local and regional economic development

WHY?8

3. Technology Extension Services: How and Where?

Technology Extension Services

Typical service methods Information provision Benchmarking and assessment Technical assistance or consultancy Referral, links with finance Training Group or network services; supply chain development Collaborative projects (R&D, implementation) Strategy development; coaching and mentoring

HOW?

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Examples of Types of Technology and Innovation Advisory Services

Type Dedicated Field Services

Technology-oriented Business Services

Applied Technology Center Services

DistinctiveRationale

Lack awareness, tacit knowledge

Weak business technology linkages (including finance)

Under-investment in & exploitation of applied R&D

Examples Manufacturing Extension Partnership (MEP) [USA]

Manufacturing Advisory Service (MAS) [England]

Industrial Research Assistance Program (IRAP) [Canada]

Public Industrial Technology Research Institutes (Kohsetsushi) [Japan]

Fraunhofer Institutes (FhG) [Germany]

Tecnalia [Spain]

10WHERE?

Other similar: LATU, Uruguay; INTN, Paraguay; SIBRATEC, Brasil; CITES Perú; INTI Argentina; Departamento Nacional de Planeación, Colombia; Spark, China; ITAP, Thailand

4. Technology Extension Services: Positioning

Positioning

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Source: Shapira et al., 2015

WHEN?

TECHNOLOGICALCAPABILITY

TES Boundary Issues

• Manufacturing-services: – manufacturing as a “traded industry” v. manufacturing-plus

programs (high value services) v. other goods & services sectors

• Integration– Of productivity and innovation services (TES core service)

with business and marketing efforts (business assistance) and other support services (finance, training)

• Focus:– Technology v sectoral v regional? Best guidance: reflect the

broader needs and makeup of a country’s industrial base

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Monitoring and tracking systems are used (tracking companies served, services provided), e.g. MEP performance metrics

Evaluation methods vary, including customer surveys, case studies, controlled studies, program reviews

Formal evaluations in US, UK, Canada, some other countries – but difficult to track all impacts

TES Program Logic and Assessment

Typical TES Program Logic Model Assessment

For more on TES evaluation and impacts, See Impact of Technology and Innovation Advisory Services, P. Shapira, J. Youtie. Compendium of Evidence on the Effectiveness of Innovation Policy Intervention. NESTA and Manchester Institute of Innovation Research, December 2013.

Intermediate outputsCapacity for change, changes in practice, improved firm capabilities

MAS Clients, 2002-2005 (DTZ Consultancy evaluation of MAS, survey of clients)

improved productive use of equipment 47%

increased investment in skills 37%

improved just-in-time manufacturing practices 35%

better stock turns/stock holding/delivery 33%

increased space utilization, and 30%

increased investment in capital equipment 20%

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IRAP clients (Goss Gilroy, 2012)

increase in firm’s business skills and knowledge 70%

increase in scientific and technical knowledge 82%

enhanced technical knowledge or capabilities 90%

enhanced ability to perform R&D 62%

enhanced business knowledge/capabilities 68%

TES Services: Assessment and Evaluation 1

Business OutcomesFindings from MEP evaluations

15TES Services: Assessment and Evaluation 2

Customized services in product development and marketing lead to bigger benefits, routine services for quality and process improvement lead to more modest firm effects.[1]

Compared with non-clients, MEP clients had 3.4%-16% greater growth in labour productivity over a 5-year period in the late 1980s and early 1990s [2]

Two updates to this study, using a comparable methods, found mixed results for MEP’s overall net productivity impacts on assisted firms for 1997-2002, 2002-2007, but did find MEP client establishments 18% less likely to go out of business, MEP services were associated with significant productivity improvements for smaller firms (5% 1997-2002, 1.2% 2002-2007), and certain kinds of services. [3]

1. Oldsman and Heye 1998, Thomson 1998, Youtie and Shapira 1997; 2. Jarmin (1999); 3. Ordowich et al,. 2012, Lipscomb et al., 2014

Broader Economic OutputsPositive economic returns generated

MAS UK [1] £1.40 – £1.80 of economic benefit was received by firms, on average, for

each £1 of public funding (Level 4 consultancy services( Estimated internal rate of return of 15% – 17% over a five year period). £155m of additional Gross Value Added through Level 4 and quantified Level

2 services between 2002-2005. IRAP (Canada) [2] Benefits of more than 10 to 1 relative to public sector costs – based on

multipliers derived from input-output models. SCALE OF AGGREGATED ECONOMIC OUTCOMES Small level of effort and resources involved in most TES interactions Average annual public spend of $3.7K MAS and $9.6K MEP per client. IRAP =

more per client (funding as well as technology and innovation advice)

16TES Services: Assessment and Evaluation 3

1. DTZ (2007) MAS evaluation, 2002-2005 services; 2. NRC and Goss Gilroy, 2007; Goss Gilroy 2012

Program Paradox

Program designo Service Projects Business Outcomes Economic Impactso Important but hard to measure and to attribute

Program paradoxo Modern complex economies are comprised not just of firms but

of value-chains and networks (including technology centers, manufacturers, services providers, entrepreneurs, investors). Industrial networks need to be “carefully tended to and nurtured”*

o Technology Extension Services have a key role in “convening and connecting” – tending to the network, not only to specific firms.

o Critically important, hard to join up, and really hard to measure

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*The Metropolitan Revolution: Northeast Ohio, adapted by B. Katz and J. Bradley, https://medium.com/where-have-you-been-city-neighourhood-and-travel/8891bb82d83d (accessed January 20, 2014).

ISSUE

Evaluation Balancing Act

Market Penetration

Financial Stability

ClientImpact

Evaluation Objectives

Type of company

Resources

Services

Key Characteristics of TES

• Capability to offer field services directly to client firms

• Breadth (including product, process, organizational and management assistance)

• Pragmatic view towards technology and innovation – Often focused on new to firm rather than new to

the market– Platform rather than industry-specific

5. Technology Extension Services: Practices and Characteristics 19

What TES it is not! Not just about technology transfer from labs to firms

– but about systemic measures to improve firms technological and business capabilities for innovation

Not just about advanced technology

– but about pragmatic improvements in operations and practices, usually with commercially-proven technologies

Not a short-term jobs program

– Results will take time to materialize and require sustained efforts; and some direct jobs may be lost as productivity increased

Not just a government program

– but a process that is driven by industry needs and market opportunities and leverages existing resources

Not a resolution to crisis or radical economic transition

– requires an existing, reasonably stable industrial base

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Key Characteristics of Types of Technology and Innovation Advisory Services

Dedicated Field Services

Technology-oriented Business Services

Applied Technology Center Services

•Core set of highly experienced field staff•Manufacturing

orientation•Delivery of a set of

services that resonate with manufacturing SMEs•Decentralized network

of offices

•Core set of top managers•Small business

orientation•Range of small

business needs, incl. entrepreneurship, finance, business assistance•Decentralized

network of offices

•Mix of in-house, consultants, students •Range of government,

large and small business clients•Primarily contract applied

R&D, testing, material analysis, instrumentation as well as TES services•May use decentralized

network of institutes

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Insights & Implementation 1

1. Evolutionary approach to development– Initial pilot (1+ locations)– Role of private sector support– Evolutionary phases• Demonstrations and pilots• National build-up• Service honing

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Insights & Implementation 2

2. Appropriate organizational context– Range of organizations (e.g., economic

development, research, standards)– Organizational characteristics : dedicated field

staff, R&D centers, and technology-oriented business support

– Leveraging partner organizations• Performance review, termination in partnership

agreements

– Smaller regions can be combined

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Insights & Implementation 3-5

3. Sufficient program scale– Field specialists, offices, close to clusters of companies– TES has minimal scale economies (fewer, bigger centers not

better than multiple, smaller locations in integrated system)

4. Core public funding– Mission orientation towards SMEs– Program stability and trust– Pricing as private consultancy will drive program to serve larger

and repeat clients and/or standardized services

5. Broad client base– Broad base of companies– Target sectors not rigidly applied

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Insights & Implementation 6

6. Structured approach to services– Demand-led services– Monitoring company needs– Multiple service approaches/points of entry

• Solving company problems (point solutions)• Companywide assessments• Group processes (training, peer-to-peer)

– Balancing cost saving/efficiency services and strategic and sales producing services

– Process for making referrals • Pre-qualification of third parties• Ongoing engagement management

– Service pricing ramp down by company size • MEP pricing: $500-$1800+/day based on client employment size

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Insights & Implementation 7-8

7. Links to equipment/infrastructure/R&D– TES not an infrastructure program• High cost of acquisition, customization, maintenance,

upgrading, operation

– Link to equipment/infrastructure services

8. Public-private governance– Advisory board with heavy private sector participation– Organizational home with good governance capacity• Cooperative agreements to combine flexibility with

oversight

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Insights & Implementation 9-10

9. Industrially experienced specialists– Years of experience in one or more industries– Ability to be broadly conversant in services rather than deep

target industry experience– Budget allocation for training, certification– Incentives

• Monetary performance based not always possible• Emphasize other benefits

10. Effective monitoring and robust evaluation– Learning as well as justification– Client impacts should be primary goal

• Surveys + other methods, including qualitative case studies• Occasional comparison group studies• Planned change in indicators

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6. Technology Extension Services: Key insights

Defining Technology Extension:

Main Take Away Points1. Technology extension is assistance provided directly enterprises to

foster technological modernization and improvement– Particularly at the location of the firm

2. TES focuses on established SMEs– Many innovation services target high tech firms but a few are designed for

regular SMEs

3. TES is associated with a set of services– Pragmatic, off the shelf business assistance involving soft and hard technology

4. Most important, TES is about the sharing of tacit knowledge of highly experienced/capable field staff rather than any set of services

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Technology Extension Services

Good Practices … and DebatesGood practices

Pragmatic approach to technology

Build client capabilities – beyond problem solving

Customized, intensive & flexible support

Expert-led, long-term relationships with business to develop trust

Program scale and reach – long-term perspective

Linkages with other service networks, finance, customers

Debates Focus on high-growth potential

firms rather than blanket support Effectiveness of general versus

specialized business support Regional networking and cluster

approaches On-line v. face-to-face v. group Role of demand-side incentives Linking SMEs to research base &

commercialization of ideas Measurement: What counts? Sustaining & justifying public funds Integrating extension services into

new manufacturing initiatives

Proposition

...an effective set of upgrading, innovation support, and networking mechanisms for small and medium-size firms (SMEs) is one of the foundation measures that nations and regions seeking to improve their economic standing need to have in place.

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Program in Science, Technology, and Innovation PolicyEnterprise Innovation Institute, School of Public PolicyGeorgia Tech, Atlanta USA

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