Industry-science collaboration in a transition economy: the case of Croatia

1. Industry-science collaboration in a transition economy: the case of Croatia Sonja Radas, Ph.D. Department for Innovation Management Institute of Economics, Zagreb

2. Industry-science relationship • Considered one of the important parts of innovation system • Received increased attention in recent years • When it comes to systematic data analysis and the economic consequences associated with knowledge diffusion between universities and firms, very little is known (Loof and Berstrom, 2004) • Industry and academics are two worlds speaking different languages (Nauwelaers and Wintjes, 2001) • Lack of studies of IS in developing economies

3. IS collaboration: positive impact • Link and Bauer (1987a; 1987b; 1989) report positive effect of cooperative R&D on market share and absorptive capacity of firms with regard to their R&D activity • Loof and Brostrom (2004) and Zucker and Darby (2000) showed that university-industry collaboration has a significant and positive influence on innovative activity.

4. Industry-science relationship Need to understand what motivates both academics and industry • Five streams of research (Carayol 2003): • Various forms of interaction • Collaboration agreements • Academics aims for collaboration • Negative consequences on academics’ behavior • Firm’s aims for collaborating

5. IS Collaboration in Croatia • Collaboration weak (not many firms involved) • Mostly routine, does not involve high power research nor technologies (Švarc, 2005) Questions: • What determines intensity of this collaboration? • What motivates firms to collaborate? • What motivates academics to collaborate? • How can IS collaboration be encouraged?

6. IS Collaboration Study in Croatia Empirical study started in 2002, finished in 2003 • Industry side • Exploratory research followed by telephone survey. Ten R&D directors and ten academics participated in exploratory in-depth one-on-one interviews • Respondents: R&D directors • 230 firms targeted, all registered as performing R&D, 190 participated in the survey • Academic side • 120 academics from all institutions in Croatia targeted, 95 responded

7. IS collaboration in Croatia: Firm’s view

8. Empirical studies on industry-science relationship: firm’s point of view • Caloghirou et al. (2001) • Firms’ motivation: • research synergies, keep up with major technological developments, sharing of R&D cost • Major benefit enjoyed: • enhancing knowledge base, improvements in production processes • Lee (2000) found that firms realize following benefits: • Increased access to new research and discoveries, significant progress toward the development of new products and processes, maintaining closer relationship with universities

9. Empirical studies on industry-science relationship: firm’s point of view • Hall et al. (2001) • IPR present an obstacle in industry-firm collaboration, depending on IP characteristics of the projects, expected results,and firm’s previous collaborative experience • Hall et al. (2000) • Research projects involving university less likely to be prematurely ended (“research awareness”) • Adams et al. (2001) • Firms collaborate on projects where academics’ research complements their own • Zucker and Darby (2000) • Cooperation with “star scientists” had a positive impact on number of patents granted, number of projects completing all 3 stages of pharmaceutical process, number of products on the market

10. Croatian study: Methodology • Sample: companies registered as performing R&D activities (all 250 listed in Statistical Office) • Based on extant literature we developed guides for one-on-one in depth interviews • Performed in-depth interviews with R&D directors from 10 companies • Wrote questionnaires based on analyzed data and literature • Pretested questionnaires • Performed telephone survey with R&D directors (20 minutes on average)

11. Research questions • What motivates firms to collaborate? • How intensely do firms collaborate? • What drives the collaboraton intensity?

12. Intensity of IS Collaboration in Firms • Intensity of collaboration is below average (2.71 on the scale from 1 to 5) • Large firms collaborate more intensely

13. What motivates firms to collaborate? Mean answers to question “To what extent do you find listed motivations true for your institution/company?” (1 (not at all true) ...5 (very true))

14. Orientation toward innovation and technology

15. Other factors • Exept for motivations and innovation and technological capability, we consider also: • There are people in the company who have knowledge to serve as liaison between the company and research institution • Academics work on things that are not applicable • Banks and investors are very willing to support company’s inovative activities • Customers are very interested in new products • Customers support firm’s innovative activities • All statements evaluated on the scale from 1 (totally disagree) to 5 (totally agree)

16. Regression: dependent variable is intensity of collaboration

17. Firms’ satisfaction with collaboration • Satisfaction with collaboration quality (3.52 on the scale of 1 to 5) • However, those firms that are very innovation and technology oriented are not that happy • Satisfaction with commercial effect (2.94 on the scale of 1 to 5) • Similarly, those firms that are very innovation and technology oriented are less satisfied • Rating of commercial effect significantly lower than quality rating (2.94 vs. 3.52)

18. Regression: dependent variable is satisfaction with collaboration quality

19. Regression: dependent variable is satisfaction with commercial effect of collaboration

20. Collaboration with foreign researchers • Decision to collaborate with foreign institutions not affected by satisfaction with domestic collaboration • Intensity of domestic collaboration has positive bearing on foreign collaboration

21. Summary: firms • Firms do not have intensive collaboration • Firms are not tremendously motivated to collaborate • Innovation and technology oriented firms collaborate more • Commercial effects of collaboration rated low

22. IS collaboration in Croatia: Academics’ view

23. Empirical studies on industry-science relationship: academics’s side • Positive effect of IS collaboration on industry documented • Lee (2000) finds that academics also benefit by • acquiring funds necessary to support graduate students and purchase lab equipment. • gaining valuable insight into their research agendas • finding an opportunity to field-test the practical application of their own research and theory

24. Empirical studies on industry-science relationship: academics’s side • Meyer-Krehmer and Schmoch (1998) investigated attitudes of German academic researchers toward IS collaboration: • Advantages: obtaining additional funding and exchanging knowledge • Disadvantages: primarily reside in the short term orientation of firms’ agendas. • Dierdonck et al (1990) Belgian academics positive about the influence of linkages with the industryon academic activities

25. Empirical studies on industry-science relationship: Academic freedom • Academic freedom may be a concern (Lee, 2000) • Restriction to publication Cohen et al (1994) • Blumenthal et al (1996) researchers receiving funding from industry take “commercial considerations” when choosing research agendas, involved in “trade secrets” agreements • Blumenthal et al. (1997) show that even if involvement in science–industry collaborations is associated with data withholding, the latter is even more often correlated with having a high publication rate

26. IS collaboration in Croatia: academics’ view • How research institutions view industry-science collaboration? • How interested they are in collaboration? • What do they see as problems? • How they perceive the other side in this relationship?

27. Methodology • Based on extant literature we developed guides for one-on-one in depth interviews • Performed in-depth interviews with 10 academics who have collaborated with industry • Wrote questionnaires based on analyzed data and literature • Pretested questionnaires • Performed e-mail survey with 95 academics

28. Is lack of collaboration caused by lack of interest? Answers on scale from 1 (not at all) to 5 (very much)

29. What motivates scientists to collaborate with industry?

30. Importance of motivations (on scale from 1 (not at all) to 5 (very much)

31. Motivation and interest for collaboration Dependent variable: interest for collaboration Adjusted R2 = 0,32, F=9,8; p=0,00000; N= 95

32. How desirable is collaboration? • Academics are very interested in collaboration • they think collaboration is good for the academic community • They think that academics should actively seek collaboration with industry On the scale from 1 (totally disagree) to 5 (totally agree)

33. Collaboration: Academic freedom

34. Obstacles related to academic environment Industry is short term oriented Promotion rules do not recognize research application in industry Not possible to earn enough due to taxation Difficult to publish results (confidentiality) IP issues Average rating 3.14 (on the scale 1 to 5) Obstacles related to firm requirements Firms do not implement the results of collaboration Problems that firms have are not interested in research sense Problems require skils that academics do not have Firms do not value enough the results of academics’ work Average rating 2.62 (on the scale 1 to 5) Obstacles to collaboration

35. Why industry does not collaborate? • Academics believe that firms do not ask for collaboration because of the following:

36. Academics’ belief about connection between R&D activities and industry’s impetus for collaboration: if firms increased investing in R&D, the need for collaboration would appear

37. Summary: academics • Very positively disposed toward collaboration • Motivated by intellectual challenge and additional income • View internal academic environment as obstacle • View Croatian industry as lacking in vision and resources • Believe that if industry had enough resources collaboration would take off

38. Comparison

39. Reality check • Academic sector • Low publishing record, in particular in certain disciplines • Small percentage of young Ph.D.s (65% older than 50) • Very small percentage of young Ph.D.s in natural sciences and technology oriented sciences • Low mobility • Industry • Overwhelmed by solving short-horizon problems • Lack of long-run planning and vision • Lack of highly educated people who can serve as liasion with academics • Mostly low technology • Question: what do these two groups have to offer to each other?

40. Is collaboration doing anything at all? • Analysis of Croatian CIS 2004 data for SMEs shows that: • Collaboration with other firms or organization significantly raises probability of innovating with processes or incremental product innovations • Collaboration with universities or research institutes significantly raises probability of innovating with radical product innovations • Although collaboration is not widespread, it does something  should be enouraged

41. Incentives for IS collaboration • What can be done to encourage IS collaboration? • Initiative for collaboration: • Both industry and scientists agree it should come from the industry, but not from government institutions

42. Incentives for IS collaboration • What would be most effective incentives? • Three most effective incentives ranked from the most to the least favored (all above average): • Tax break for firms for investment in own R&D (favored by industry) • Tax break for firms for investing in joint research programs with academic institutions (favored by academics) • Government’s financial support for joint IS research programs

43. Effectiveness of incentives: ranking Ranking the best option receives 3 points, the worst 1 point

44. Incentives for IS collaboration • For improving the knowledge base of companies and to enable future communication with academics, the following incentive is favored by both firms and academics: • Government supports first employment of new Ph.Ds in industry so that it pays 50% of their salary for the first year and 30% for the second year

45. Innovation incentives in Croatia • From 2003 to 2006 there were tax incentives for investment in R&D, cancelled because not compatible wih EU regulations • There is a need to design and bring forth a new set of incentives

46. Conclusions • IS collaboration in Croatia weak, but there are some results • In cases when it exists, commercial effect and output improvement lacking • There is weakness in both industry and science – both have to be strengthened to be able to meaningfully interact • Incentives should be offered with no direct interference of government, preferably as tax breaks