Por: Carlos Chambel Miguel Leocádio João Meyer

1. SECTORAL PATTERNS OF TECHNICAL CHANGE Por: Carlos Chambel Miguel Leocádio João Meyer

2. Summary: 1. Sectoral Patterns of Innovation 2. Towards a Taxonomy and a Theory 3. Some Analytical Implications 4. Future Perspectives

3. The similarities and diferences amongst sectors in the sources, nature and impact of innovations, defined by the sources of knowledge imputs, by the size and principal lines of activity of inovating firms, and by the sectors of Innovations’ production and main use. Purpose: Data collected by Townsend et al. on the characteristics of about 2000 significant innovations, and of innovating Firms, in Britain from 1945 to 1979. The Data Base:

4. Sectoral patterns of innovation Institutional sources of main knowledge inputs Number of observations: 3013 • 7% from the public technological infrastructure • (higher education, government laboratories, and research associations) • 59% from within the innovating firms themselves • 34% from other firms Number of sources appointed ~ 1,5 Underestimate the contribution made by public technology infrastructure Industrial R & D total expenditures: ¾ on D Innovation vs. Development: the costs of transfer can be high Analysis

5. Sectoral patterns of innovation Sectoral patterns of production and use of innovations Product innovations: those innovations that are used outside their sector of production Process innovations: those innovations that are used inside their sector of production Product innovations ~ 70% 5.3 to 1 for manufacturing as a whole Ratio of production to use of technology: 0.1 to 1 for outside manufacturing

6. Sectoral patterns of innovation Sectoral patterns of production and use of innovations Main Sectors Product Innovations Process Innovations Instruments, Mechanical Engineering, Chemicals, Building Materials (mainly glass and cement and electrical and electronical engineering Leather and footwear, textiles, vehicles, metal manufacture, shipbuilding and food and drink Innovations produced in the sector: Innovations used in the sector: All sectors of manufacturing except textiles Textiles

7. Sectoral patterns of innovation Sectoral patterns of production and use of innovations Innovations Instruments, mechanical engineering, chemicals and electrical and electronical engineering (Mainly process industries) Production > Use Building materials, metal manufacture and food and drink (Caracterized by continuous process technology) Production  Use (Caracterized by assembly operations) Production < Use Shipbuilding and vehicles Note

8. Sectoral patterns of innovation Caracteristics of innovating firms: Size and technological diversification According to the principal sector of the innovating firms´ activity: • Big contribution of small firms (1 - 999 employees) in mechanical and instrument engineering, • textiles, and leather and footwear. • Big contribution of large firms (10,000 and more employees) in other sectors. According to the sector of the innovations: • In sectors where large firms predominate, the two size distributions are very similar. • In mechanical and instrument engineering, and in textiles, both the number of innovations and • the relative contribution of large firms are bigger when classified by sector of innovation, than • when classified by the principal sector of activity of the innovating firm. A relatively large number of innovations are produced in these sectors by relatively large firms with their principal activities in other sectors. Continuous process and assembly industries

9. Try to categorise and explain the caracteristics: to propose a taxonomy and a teory Appropriate for specific applications and appropriated for specific firms • The ingredients • Knowledge applied by firms is not general purpose and easily transmitted and reproduced • Technical change is a cumulative process to firms  what they can try to do in future is strongly conditioned by what they have been able to do in the past • Variety – sectors vary in the relative importance of product and process innovations, in sources of process technology, in size of technological diversification of innovating firms Some regularities begin to change • Technical change comes mainly from suppliers of equipment • Firms and assembly and continuous process industries tend to concentrate their innovative resourses on process innovations

10. Uma grande parte dos processos inovadores usados é originada em outros sectores • Supplier dominated firms • Traditional sectors of manufacturing, agriculture, wood & paper, housebuilding, many financial and commercial services • They are generally small and their in-house R&D and engineering capabilities are weak • Make a minor contribution to their process or product technology  high proportion of proccess innovation produced by other sectors • Most innovations come from suppliers of eqp and materials

11. Departamentos de engenharia de produção constituem uma grande fonte de inovação nas empresas de produção intensiva • Production intensive firms • Large scale fabrication & assembly production • Improved transportation, simplification of production tasks • Unit capacity costs can (potentially) decreased 1% by every 3% in plant capacity • Fabrication & assembly machines take progressively more complex and more demanding tasks • Continuous processes increased scale & high temperatures have resulted from improvements in materials, control instrumentation and power sources • Complex and interdependent production systems with external costs of failure in any part very considerable  trouble-shooting and process engineering have been established  bottlenecks corrected  improvements in productivity

12. As Science based firms têm uma grande contribuição para a inovação: • na indústria química encontram-se valores de 40% • na electrónica/produtos eléctricos há uma contribuição de cerca de 50% • na engenharia mecânica os valores baixam para 20% • Science based firms • Found in chemical and electronic / electrical sectors • Main sources of technology are R&D activities in the sectors • Products depended on prior development of basic science (ex:synthetic chemistry, biochemistry, electromagnetism, radio waves, solid state physics, etc) • It has been difficult for firms outside the sectors to enter them • Firms appropriate their innovating leads through a mix of methods (patents, secrecy, natural technical lags, firm specific skills) Whose trade is not to do anything, but to observe everything

13. Supplier dominated firms Consumer electronics, plastics Power tools, transport equipment Plastics & electronics for car industry Scale intensive firms Science based firms Specialised equipment suppliers Technological linkages and changing trajectories

14. Implications of proposed theory Science and Technology push vs Demand Pull Schmookler:(66) Demand Pull with stronger influence on innovative activity Strong association between volume of innovative activity (patents) and investment activity in user industries, rather than in the output of the supplier industries. Pavitt:(84) Investment both in Supplier Dominated and Production Intensive firms stimulate innovative activity No surprise! Planning of investment and co-ordination with production

15. Implications of Proposed Theory Product vs Process innovation Product Innovation • High proportion of Science-based firms (Also important in other sectors, like specialized suppliers: mechanical and instrument engineering) • Important Product Innovation: • Positively associated with Patent intensity and R&D • Negatively associated with scale and complexity of process technology Process Innovation Production intensive sectors is expected both high proportion of resources in process innovation and high capital intensities, size of plant and industrial concentration

16. Implications of Proposed Theory The locus of process innovation Supplier-dominated sectors: firms and production plant small in size; innovations coming from suppliers Production intensive firms: large in size; process technology generated in-house Positive relation: proportion of a sector’s process technology generated in-house and size of plant or firm in sector Upstream equipment suppliers become important source of process innovation with increasing size of market for production process equipment Reflects greater division of labor in production

17. Implications of Proposed Theory Diversification Uncertain results of research are likely to give better results in a diversified firm Production intensive firms: diversify less in production than in technology. Textiles on the other hand diversify more in production than in technology Non technical complementarities with other sectors Supplier-dominated sectors: Upstream technological diversification into sectors supplying equipment : -Negatively associated with R&D intensity -Positively associated with scale and complexity of production technology (innovation activities on production techniques and upstream equipment) The proposed model, identifies technological trajectories of firms as a function of their principal activities Prediction of possible paths of technological diversification

18. Implications of Proposed Theory Firm size and industrial structure Uncertain results of research creates tendencies for concentration of both production and innovative activities Supplier-dominated sectors: increase in size is usually not attributed to innovation, although might enable more efficient process technology Production intensive firms: innovation associated with large and increasing size

19. Future Perspectives • Proposed taxonomy needs to be tested • On the basis of complete sectoral coverage • Accumulated case studies • Data of innovative activity becoming available (patents offices) • Proposed taxonomy needs to be modified and extended • Exploitation of natural resources included in production intensive... • May be used in future by policy makers and analists • Relative contribution of small and large firms to innovation • Technical change; the directions of innovative activities • Conceptualization : most generalizations are likely to be wrong