Discuss about the National Innovation Capacity Capability.
National innovation capacity refers to the capability of the country to provide the commercialization of a flow of innovative technology in the long term. It depends on the capability of innovation infrastructure of a nation. There is a presence of differences in the intensity of innovation among the countries. The determinants of country level differences in innovation intensity are explored by the way of gaining information related to relationship between international patenting and the variables associated with national innovative capacity. In addition to this, variations in the performance of different countries is occurred due to the level of inputs devoted to innovation i.e. research and development. The innovation capacity of the nation also influences the downstream commercialization such as achievement of large market share through the export of high technology products in the market (Zohuri, 2015). This report emphasizes on the occurrence of the significant variations in the economic performance of different major economies such as China, US, Japan, Germany and UK due to technological enhancement or innovations.
Innovation is considered important for the national economy. The government of China has now considered the increase in the innovativeness and transformation of the nation in order to become a leader in science and technology in the world. The government has created endogenous innovation for the purpose of bringing advancement in the NIS of the country. This helps in accelerating the growth of the economy. The NIS of the country has developed by the use of state run , centralized and top down system. In china, the innovative performance is measured by the use of patent behavior of the key organizations. There are different entities such as universities, research institutes and firms which contribute towards patent statistics by the creation of the innovative performance (Usman, et al., 2015).
The innovative performance of the key organizations is measured by the use of volume and value of the patent applications registered by them. The information related to patent application helps in analyzing the innovation capacity of the NIS at a given point of time. The information related to key organizations and patent applications helps in the determination of the capacity of the NIS in a measurable innovative performance. The profits of the companies indicates that there is a formation of new technologies by different rival organizations that exists on ex-post market demand for the purpose of establishing innovation in the company by the way of spur diffusion, and selection of the appropriate inventions in the market (Wu, 2004).
In developing economies such as China, competition among the organization is not only determined by the prices but also through the quality and efficiency drive by new products and processes. In addition to this, difficulties are faced by the organizations due to changes made in the strategies. The NIS shows an inertia due to changes in the strategies adopted by the firms at a slow pace. The firms that are characterized as pioneers has a vital role in increasing the rate of innovation through radical innovations, diffusion and exploitation of the knowledge (Boeing and Sandner, n.d).
Absorptive capacity is regarded as the capacity of the key organizations to internalize the new knowledge that is generated inside or outside the NIS system. It is considered relevant to measure the innovative performance of a closed NIS and open NIS where the information is channeled through foreign organizations in the system. The foreign firms make significant contribution towards the infusion of the new knowledge in the NIS of the host country as China is receptive to the knowledge and technologies created by foreign firms that have operations through a subsidiary in the host country. This helps the NIS to get access to the competencies related to existing technology generated outside the system (Heshmati, 2007).
Multinational companies are considered superior to domestic firms in terms of technology as they have a potential to develop and take advantage of new technologies and intellectual assets. The investment in research and development and training programs for upgrading the skills of the employees by the companies has a positive impact on productivity and innovative capability of the domestic firms. This has also lead to the increase in the innovative performance of the country. Besides this, there is an occurrence of interactions with the business sector and relations to the society for the purpose of generation of the new knowledge and has a significant impact on the knowledge diffusion which results in influence to the competition present in the market (Wu, 2004).
The research organizations deploy some resources for the purpose of patenting the knowledge attained from various businesses for the purpose of transfer of technology. The shifting of the resources by the universities towards commercial applications has a negative impact on the capacity of China for innovative performance. China give emphasis on the use of patents by the organization to include technological innovations in a company. It stimulates invention and leads in the occurrence and provision of the monopoly to the inventor and provide disclosure of the information necessary for the operation of the new process (Huang, 2014).
It results in reducing the duplication of the information as per the patent system beneficial for society as a whole. The statistics related to patent helps in providing information related to the measurement of the capability of the innovation in the country. Increase in the number of patents results in an increase in the innovation capability of the country. The patent system helps in translation of the patent applications which is considered as a measure of the innovative performance. The inventor recovers the costs related to inventive activity by creation of the monopoly in the market. It results in the increase in the amount of investment carried out by the company to foster innovation (Usman, et al. 2015).
When an organization wants to increase the frequency of the innovation then there is a need of presence of strong intellectual property right and longer patent length. Besides this, there is also an increase in the export of high tech products in a tremendous manner in the year 2008 as compared to the year 1995. The country has surpassed US and Japan with a global market share of 16.9% in the high tech products. The main reason behind the expansion of thw high tech exports from China is the reallocation of production capacity by multinational corporations and outsourcing of information and communication technology (Zhao and Yang, n.d).
The semiconductor industry of the country has relied on technological innovations but consider cheap labor as a comparative advantage in comparison to other countries. Along with this, technological innovation is considered as the centre of the economic growth of the countries. The government of China emphasizes on increasing the innovativeness of the country in order to transform the nation into innovative nation by the year 2050 making it a leader of technological innovation in the world. The profit gained by the companies helped in the determination of the new technologies adopted by the companies. Along with this, competition in the industry between different companies is not only determined by the prices but also by the diversity exists between different products offered by the companies (Kocoglu, et al. 2012).
Nowadays, companies in various countries have made investment in research and development activities due to which there is a presence of increased per capita of international patenting rate in US as compared to other advanced economies. The national innovative capacity is dependent on the innovation infrastructure and cross cutting factors which contributes to the bring innovation throughout the economy. The infrastructure of innovation takes into consideration the science and technology policy environment and knowledge stock upon which there is a development of new ideas. The infrastructure of innovation takes into consideration different elements of national innovation systems (Feldstein, 2008).
The economy of the US is driven by the technological innovation. For the economic growth of the country, there are two elements which has a direct impact on the performance of the economy i.e. capital investment and technological innovation. Increase in the population due to increase in the real income per person to 2% SINCE Civil War has helped in transforming the economy of US from rural to industrial power. The economy of US has surpassed the economy of UK at some time. There is a drop of 2.5% in the real GNP growth rate of US in recent years (Gaile and Willmott, 2005).
The country has achieved growth in per capita income through two different ways i.e. attaining more output from the available resources and utilizing more number of resources. Information communication technology is considered as the fastest growing sector and aids in establishing innovation and development in the country. This sector has helped in creation of 75000 jobs by 2020 and resulted in a growth rate of 22%. In addition to this, there is an emergence of 5 additional jobs in other sectors for each job in the information communications technology sector (Schmid, et al., 2012).
The competitiveness of the US economy is influenced by training and education policies along with the research and innovation. The country has gained 4th rank in innovation because of presence of scientific research institutions and heavy spending by the companies on research and development activities. The country is considered as the top innovation leader in the world as per the European Innovation Scorecard. The economy of US is characterized as an excellent capacity for innovation in terms of high spending research and development activities and presence of large number of scientific research institutions and sophisticated business culture (Melas and Zhang, 2016). In this country, the companies provide new and different goods by the use of sophisticated production processes in order to gain competitive advantage over other firms in the market. In addition to this, the business sectors collaborate with academic institutions in order to develop skilled labor by providing training to the students for the purpose of producing innovative products that are demanded by the customers (National Research Council, 2004).
US is the country in which companies achieve competitive advantage due to presence of innovation in the products and services offered by them by the way of making investment in research and development activities. The country has gained advantage over other countries in terms of market size and labor market efficiency. There is a heavy dependence on the business cycles in US by growth of business through research and development department. The growth rate of research and development in the businesses is two to three times higher than the overall GDP of the country. This is the reason that the competitiveness of the country is driven by innovation (Fanjiang, et al., 2005).
The inputs of innovation is specialized and targeted to a specific group of people which results in gaining leadership in the market. There is more concentration on the high tech industries by manufacturing research and development which resulted in an increased innovative performance in the country. Approximately 70% of the manufacturing research and development is carried out in high tech industries in US. The high tech manufacturing industry of US represents 28% of the overall industrial value added services (Abreu, et al., n.d.).
In US, majority of the research and development activities are carried out in the information and communications technologies. Majority of the international firms carry out their research and development activities in US which has a significant impact on the overall performance of the country. The main reason behind it is that there is an occurrence of the inflow of the funds which accelerates the economic growth of the country. Along with this, the US based companies has made effort towards diversifying the outward research and development investment by making investments in all major economies of Asia (Greenhalgh, et al. 2004).
The country also applies for high tech patents at the European Patent Office for the purpose of gaining large market share. The American venture companies are making investments in the country in the field of medical, electronic and data processing technologies in order to accelerate the economic growth (BIS, 2012).
Germany has made investments in the technological innovations in the form of electron microscope, MP3 music format and LCDs. Besides this, the country has also made some of the specialized inventions iof which the general public do not have the knowledge. The companies of Germany have the knowledge that the customers do not only consider the price while making buying decision but also consider the innovartive features included in the product. The country is known for its engineering excellence and technological innovatrion brought in the products and services offered by the companies. The small and medium sized enterprises of the country dominate the economy as majority of the innovations are carried out by such enterprises (Hall and Soskice, 2001).
The innovation brought by German companies is based on technical expertise which facilitates small firms to become market leaders in narrow segments. Such companies become successful by providing best technology in a particular segment. Germany is considered as an international leader in the science and technology industry in terms of workforce. This country made huge investments in the research and development in an international market in order to become advanced economy (United Nations, 2015).
As per the report of World Economic Forum, the country has ranked 8th out of 139 countries in terms of innovation. It is considered as the international leader in terms of capacity for innovation. Besides this, it also gained 4th position in terms of spending in the research and developmental activities carried out by different companies of the country. It also ranked 6th for the presence of high quality of scientific research institutions. In addition to this, the country has large number of top research institutes which invest large amount of money in research and development activities for the purpose of bringing technological innovation in different products and services offered by different companies (Taylor, n.d.).
The companies of Germany have also filed the Patent Cooperation Treaty Patents in sectors such as medium- low technology sector and medium- high technology sector. Germany has ranked third for the filing of the patents with European Union trade offices. Germany has developed various incremental innovations in various sectors such as electrical engineering, automotive engineering, chemical and mechanical engineering. Germany is considered as the coordinated market economy where the firms still prosper even when perform radical innovations in their products and services. The main reason behind it is that in the area of biotechnology and software, the German institutional framework of technologies is fitted which help in gaining growth and prosperity by the country in terms of economy (Becker and Dietz, n.d)..
The enterprises specializes in cumulative technologies rather than discrete technologies which provide a stable platform to companies to grow and prosper. There is a high demand for integrated system solutions which are regularly updated and expanded for the purpose of providing high quality services to commercial users of the technology. The enterprises of Germany are specialized in the production and development of instruments and softweares which are used by pharmaceutical companies. The products of this industry has to undergo continuous development in order to meet the requirements of the customers. Germany has surpassed the UK in terms of innovations brought in different industries such as power, textiles, and railways (Lichtenthaler and Linchtenthaler, 2009).
The business model of the Germany is sophisticated in terms of production processes and distribution channels. The companies of Germany is considered the most innovative companies in the world and spend heavily in the research and development for the purpose of displaying the capability of bringing innovation in the products and services offered by it. The companies also have the ability to absorb new technologies at firm level. Along with this, scientists and engineers are more readily available in the country which facilitates in bringing innovation in the products and services offered by the companies. It also results in increasing the market share of the companies in the country and contribute towards the economic growth and prosperity (Workplace innovation and its relations with organisational performance and employee commitment, 2012).
There is a presence of rigidity in the labor market due to lack of flexibility in wage determination and hindrance in the creation of the jobs during downturn of business cycles. In addition to this, there is also a requirement of improving the quality of educational system in the country which helps in providing skilled labor with flexibility for the purpose of improving the innovative capacity of the country. This in turn helps in maintaining the competitive position in the international market. The country has made improvement in the education quality which is considered an important indicator for sustained innovation led growth. In the 1980s, the innovative capacity of the country has grown immensely and tremendously (World Economic Forum, 2015).
This country has able to maintain a relatively high level of innovative capacity in the 1990s even though a drop off is resulted from reunification with the East. The country has made investments in innovation infrastructure and support cluster innovation environments. In Germany, government put emphasis on creating new ideas and implements it in different processes and procedures for the purpose of creating value for the customers. The government does not restrict the access to the available relevant data which increases the chances of innovation to be brought in the public policy and increases the political accountability. Companies in Germany are ready to take high risks which enables occurrence of innovation which in turn facilitates in achieving competitive advantage over other players in the market (OECD, 2007).
The government also provide support to the businesses which fails due to inadequate occurrence of innovation and unsuccessful implementation. It is necessary for the businesses to have vision for the purpose of identification of the long term gains by providing cutting edge product and process innovation. Germany is performing well in terms of different management practices adopted by manufacturing firms. The management performance of companies has a significant impact in terms of variations in the economic performance of the country. Improvement in the management practices results in increasing the productivity levels of manufacturing firms in the country. Germany is considered as one of the top performers in terms of occurrence of innovation in the companies. This has helped in boosting the overall economic performance of the country (Lichtenthaler and Linchtenthaler, 2009).
Japan is ranked 9th in terms of most competitive economies that has a strength in innovation and has gained a strong institutional framework. The country has achieved a competitive edge over other countries in business sophistication and in innovation. There is a presence of talent, high quality research institutions and heavy investments made in research and development which fosters capacity to innovate in the economy. The country has ranked 4th in terms of registration of highest number of patent applications per capita in the world. In addition to this, the companies in the country have produced high value added goods and services which also facilitates in gaining a competitive edge over other economies in the world (Penrose, 2009).
The competitiveness of the country has dropped due to presence of severe macro-economic weaknesses. There is an occurrence of budget deficit of 10% of the GDP for the past four years. In addition to this, there is a presence of public debt of around 240% of the GDP of the country. There is a presence of rigidity in the labor market along with the low female participation in the labor force. For creating opportunities for the businesses, the government has levied high taxation and various trade barriers which leads to the occurrence of low foreign investment and ownership. This also leads to the low attraction of the labor towards the businesses. Innovation considers both quality and quantity (Yeo, 2010).
Japan is considered as one of the top economies in terms of innovation quality and international dimension of patent applications measured by universities’ performance and reach of scholarly articles. Although, there is an occurrence of risks, there is an increased growth in the economic performance of the country in comparison to past years. There is a fall in the budget of research and development of the countries due to slowdown in emerging markets and decreased appetite of business investment that resulted in slow down of advanced innovation expenditures. Japan is considered as the most intensive country across the globe in terms of research and development investments (World Economic Forum, 2013).
There is a growth of 9% in patent filing in the year 2013 at the global level which helps in hiding of the information of a decline in the actual patent filing in Japan. The level of research and development spending has significantly above the crisis level in Japan which is composite of private and public research and development activities. In this country, the level of research and development activities has reached at a level prior to the occurrence of the crisis. Japan is moving towards top tier performers in terms of innovation as per the global innovation index. According to global innovation index, the country has achieved 19th position in the year 2015. The upward movement in innovation quality is the result of increased levels of patents filed in different offices (Goodwin, et al. 2015).
The country is moving upwards in the global innovation index. The country has gained a 2nd position in the patent filling which has a significant affect the overall performance of quality of innovation. It has performed well in the combined quality indicators in comparison to overall rankings. For the filing of the patents, the country uses multiclass filing systems. At the global level the manufacturing output has increased by 2.7% annually in advanced economies. The manufacturing sector has contributed from 10% to 33% in the value added services. This sector has contributed to research and development, trade and productivity to a large level . It facilitates in generation of 70% of exports in manufacturing economies such as Japan. Approximately 90% of the spending in research and development is done in the manufacturing sector for the purpose of providing high quality and innovative products to customers for the purpose of satisfying their needs and demands (Penrose, 2009).
The emergence of new technologies and new markets provide opportunities to different manufacturing companies to target new customers by providing them innovative products which are aligned with theire needs and demands but there is also a presence of certain exposures and risks due to occurrence of changes in the business environment such as occurrence of natural disasters like Japan’s earthquake in 2011. Besides this, the other factors also influence the productivity of the company such as fluctuations in demand and commodity prices, occurrence of disruptions in supply chain and volatility in currency. The innovations and new technologies developed in the manufacturing sector results in increasing the productivity in other sectors (Vermesan and Friess, 2013).
Approximately 67to 89% of the research and development expenses are incurred in manufacturing sector. Majority of the manufacturing firms registered patents in the year 2007-2009. This does not include additional investment that was made through research and development service companies. Many of the manufacturing companies such as Toyota has exercised lead factory model which emphasizes on the development of the process and the equipment at the lead plant the processes, applications and platforms that are developed at lead factory is distributed to different branch factories. The central research and development department of Toyota is still located in Japan (Acton, 2012).
The main reason behind it is that it facilitates in achievement of intellectual property protection, availability of talent and access to the consumers that demand customized products. In addition to this, the location of research and development department is also highly influenced by incentives and favorable tax policies. Japan concentrates on mass production due to which massive investments are made by the companies to increase the production capacities of their manufacturing plants (Acton, 2012).
The public procurement sector of Europe is considered as open in the world despite of the difficulties faced by the firms to enter into public procurement markets at international level. There is an occurrence of maintaining bilateral agreements with different countries such as Japan and US to bring technological innovation in the products and services offered by the companies. The main drivers of economic growth in a country include optimum utilization of available resources such as labor, capital, land and innovation. Japan has limited amount of natural resources. Innovation is considered as the vital input for revitalization of the economy. Growth in the economy of Japan is derived from the firms that exhibit innovative activities to survive in the market (Acton, 2012).
UK has ranked 7th across the globe in terms of its overall level of spending in research and development. This country has 3% of the total level of research and development spending at the global level. The country is making relevant investments in intangible assets for the purpose of driving innovation in the economy. The investments made in the research and development has helped in performing well in the challenging economic conditions in the country. Innovation is considered as a key driver for the economic growth and prosperity of the country (Coad, et al., 2014).
UK is considered as the largest performer in the research and development domain due to commercialization of the research in the business sector. The research and development expenditure in UK accounts for 1.8% of the GDP in 2011.The government in UK has set a priority to make spending of the money on long term infrastructure projects such as big data, robotics, and in new facilities associated with science and technology for the purpose of acceleration of the economic growth of the country. The country also committed an additional resource funding of £ 185 million for the purpose of supporting innovation in the business sector (OECD, 2000).
The government has also emphasize on removal of the barriers related to innovation in different sectors of economy by the way of implementation of the industrial strategy which is based on five strands namely technologies, procurement, skills, finance and sectors. The country has developed different strategies for different sectors for example agricultural technologies strategy for agriculture sector in order to bring innovations in the agriculture sector. This helps in reducing time and energy devoted by the farmers for plantation (Roper, et al., 2009).
This has helped in increasing the contribution of the agricultural sector in the economic growth and prosperity. The government has made an investment of £70 million in a new Agri-Tech Catalyst to support and fund innovative ideas. Besides this, the automotive sector of the country is also highly innovative and has invested around £1.7 billion in the year 2012 in order to bring transformation in the sector to meet the changing demands of customers. It has transformed in a manner that it has the ability to produce three cars in a minute. It also helped in securing the position at the global level for low carbon research and development (Furman, Porter and Stern, 2002). The country has made an investment in eight great emerging technologies in which it has in depth knowledge of research expertise and the capability of the businesses to develop different applications for achieving forefront of commercialization. Such investments are made by the country for the purpose of improving high level skills and becoming a global leader in cutting edge field of research (Kramer, Jenkins and Katz, 2007).
The country has provided first flexible imaging sensor to the world by bringing innovation through the application of biomedical diagnostics, smart packaging and surface scanners. Along with this, the country has also invented artificial tooth generated by the use of human gum cells in a hope to provide tooth for missing teeth. In UK, research and development activities are carried out majorly in business sector. There is an easy access to finance in UK which provides an attractive business environment for innovation in the country (McKinsey Global Institute, 2012).
Firms relies on traditional research and development activities for the purpose of achieving competitive advantage in high value added activities in global value chain. Along with this, there is also a requirement of heavy investment in knowledge and other intangible assets for the purpose of manufacturing hard to imitate products and services. Investment in knowledge based capital has helped in increase in the per capita income of the country due to which the investment in intangible assets is more than the investment in tangible assets of innovation in UK. The country is ranked 2nd in the investments made in intangible assets in the world which includes intellectual property, economic competencies and computerized information (European Commission, 2012).
The UK economy is innovation driven and attains 10th position out of 148 countries in the year 2015. The main reason behind it is that the businesses and universities collaborate with each other in order to gain skilled labor that enables process of innovation in the companies to attain sustained competitive advantage in the market. In UK companies find difficulty in accessing finance for carrying out different business operations for the purpose of attaining sustainable competitive advantage. UK has skilled people in research institutions that generates new knowledge and drive innovation in the economy by providing new ideas that can be converted into commercial outcome (Abreu, et al., 2006).
Conclusion
It can be concluded that there is a significant variations in the economic performance of countries such as USA, China, Japan, Germany and UK due to their capacity for innovation in the countries. Except China, all other countries fall in top 10 innovative countries across the globe. Innovation is taking place in various processes and procedures of different firms which also result in creation of the jobs and contribution towards the economic growth of the country.
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