1 / 40

The innovation system in the telecommunications sector

The innovation system in the telecommunications sector. A comparative approach: France – South Korea David Flacher, Cédric Durand, Romain Lestage Paris 13 University CEPN (CNRS UMR 7115) ‏. Main issue.

zelia
Download Presentation

The innovation system in the telecommunications sector

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. The innovation system in the telecommunications sector A comparative approach: France – South Korea David Flacher, Cédric Durand, Romain Lestage Paris 13 University CEPN (CNRS UMR 7115)‏

  2. Main issue • Is the French institutional context favorable to telecommunications industry and IT development ? • The dynamics of innovation can be explained by many characteristics of the environment such as: • Institutions including • Routines, conventions, rules, types of governance • More « established » institutions, organisations… • National and international context • History (and thus technological path)‏

  3. Content of the presentation • 1) Stylized facts: divergences in terms of performances between Korean and French ICT sectors • 2) Can these stylized facts be explained by the trajectories of the National System of Innovation (NSI)? • 3) Do the French and Korean NSI fit well fit well for the development of the telecommunications and IT sectors? • 4) Conclusions et perspectives

  4. 1- Divergence between France and Korea : stylized facts • 1st stylized fact • Infrastructures and usages are more developed in Korea than in France • Exemple: Broadband subscription in 2006 (OECD)‏

  5. 1- Divergence between France and Korea : stylized facts • Broadband subscription on mobile phone in 2005

  6. 1- Divergence between France and Korea : stylized facts • Web 2.0 (blogs by languages in OECD countries in 2006)‏ • E-government…

  7. 1- Divergence between France and Korea : stylized facts • 2nd stylized fact • Innovation (particularly hardware innovation) is more dynamic in the Korean telecommunications sector • Exemples • Patent registrations • Triadic patent families (OECD)‏ • Parallel patent applications in the USA (USPTO), EU (OEB) and Japan (JPO)‏ patents offices • Induces a selection of the main innovations in order to lower the bias due to national applications

  8. 1- Divergence between France and Korea : stylized facts • Innovation is more oriented towards ICT in Korea

  9. 1- Divergence between France and Korea : stylized facts • 3rd stylized fact • Equipment manufacturers are at the core of the Korean ICT strategy • Exemples • Share of ICT manufacturing in the total value added of manufacturing sectors (OCDE, 2008)‏

  10. 1- Divergence between France and Korea : stylized facts • Strong and improving position of Korea in ICT international trade

  11. 1- Divergence between France and Korea : stylized facts • 4th Stylized fact • France appears to be in a better position for services (with the exceptions of games, mobile TV and e-payment)‏ (Lee & Chan-Olmested, 2004)‏

  12. Rank France Korea Computer and information services 11 30 Communications services 5 19 Software 7 14 1- Divergence between France and Korea : stylized facts • Services exportations (OCDE, 2007) :

  13. 1- Divergence between France and Korea : stylized facts • In short • Opposite paths in France and Korea in the 1990’s • France position becomes weaker in the international competition • In the ICT manufacturing sector • In the associated innovation • In ICT exportation • Rapid improvement of Korea’s position in the same fields and in the diffusion of usages • This suggests that there is a cumulative relation between on the one hand manufacturing development and, on the other hand, infrastructures deployment, innovation and the diffusion of new usages (it also suggests that services do not necessarily play a central role). • To what extent divergence between the trajectories of French and Korean National Systems of Innovation could explain such divergent paths?

  14. 2- National systems of innovation trajectories as an explanation • Three historical periods • After world war II • State-led Innovation System (IS) in France and in Korea • Since the 1980’s • Divergent IS paths in a context of economic liberalization • Since the end of the 1990’s • Reconfiguration of IS in a context of liberalization of the telecommunications industry

  15. 2- National systems of innovation as an explanation

  16. 2- National systems of innovation as an explanation • Identification of strategic sectors and “Grand Projets” • Coordination mixing private/public entities: • Public banks, planning commission, incentives (loans, subventions, public orders, supports for exportations…)‏ • Grandes écoles (with high level of selection)/Universities • strong public/business networks based on a common educational background of the elite • CNRS (basic research) / Specific labs for applied research (CNET, CEA, CNES)‏ • Outcome • Constitution of world-class national champions; • Building of significant technological advantages for the country as a whole.

  17. 2- National systems of innovation as an explanation • Autonomy (technological take off, substitution of importation), employment and growth • Method • Promotion of exportation and limitation of importations • Big family owned firms (chaebols) but depending from the State • Massive investment in • Primary and secundary education (in the 1950’s and 1960’s)‏ • Resarchers education (in the 1970’s) through the creation of national institutes • Technological catch up (but not yet innovation driven system)‏ • Reverse engineering, partnerships (USA), specific equipments • Applied research for the development of local solutions (substitution)‏ • Restriction of FDI  Independent management and push Korean firms to develop their own techniques. • Outcomes • Rapid industrialization (through assimilation of foreign technological capabilities)‏ • First generation of high profile researchers and engineers

  18. 2- National systems of innovation as an explanation • Advantages • Long term investments • Significant outcomes (in sectors like railway, airspace, electricity, telecommunications…)‏ • Limits • Anticipation of changes is more difficult since the elite (in France) and the chaebols (in Korea) are not specialized enough • SME are not really taken into account • The system does not fit well with bottom-up innovation • Small scale, flexible and decentralized types of innovation and of innovative firms

  19. 2- National systems of innovation as an explanation • Second period: since the 1980’s • In France • Dislocation of the IS which implies • State has lower control on the big firms • R&D public expenditure turns down (and public institution de-specialization)‏ • Interruption of the main industrial programs • Development of European policies (and of the EU market)‏ • Economic situation: • Development of finance-led capitalism (relying on market funding and on shareholder value maximization)‏ • Liberalization, privatization et internationalisation of firms ownership • Slowing down economic growth

  20. 2- National systems of innovation as an explanation • In Korea, since the 1980’s • R&D is getting more and more self-governed by firms (in a context of economic growth)‏ • Firms expenditure for R&D is growing fastly • Creation of research labs networks (including foreign labs) and reverse brain drain of Korean researchers previously installed abroad • Institutional evolution adequate to changing strategy • From learning and catching up approach • … to technological accumulation and innovation • State remains active and voluntarist • Public funding and fiscal incentives for the firms • Important R&D public programs at the technological frontier • Growing public expenditure for higher education • Public institutes • Concerning R&D strategic fields (both basic and applied resarch)‏ • Working with private firms (ETRI…)‏

  21. 2- National systems of innovation as an explanation • Main outcomes: • R&D expenditures (as a share of GDP) (OECD, 2008)‏

  22. 2- National systems of innovation as an explanation • Patent applications (OECD, 2008)‏

  23. 2- National systems of innovation as an explanation • R&D public expenditure (as a share of GDP) (OECD, 2008) : importance of military expenditure (mainly nuclear ones) in France

  24. 2- National systems of innovation as an explanation • Third period: since the middle of the 1990’s • In France • Deep transformation of the IS • From a vertical (i.e. sectoral) to an horizontal approach • Towards a regional (territorial) approach • From top-down to bottom-up approach • In Korea • IS more and more driven by private firms • Reconfiguration of ministries. • Funding research more and more through projects rather than through lump-sum system • Creation of « research councils »in charge of planning, funding and assessing public labs • Creation of technological regional clusters

  25. 2- National systems of innovation as an explanation • Advantages of a de-verticalized and territory-oriented approach: • Fits better with applied research and patent applications • Fits better with small and/or decentralized innovations • Limits • Research leading to short term profitability is privileged • reduction of public researcher's autonomy => restraint for creativity and initiative • Constraints due to « Project » organization (administrative tasks…)‏ • Low public expenditure (in terms of jobs and lump-sum financing)‏ • Possible State initiatives are more limited

  26. 2- National systems of innovation as an explanation • Summarizing • Strong divergent paths between French and Korean IS… • France • Stagnation of R&D effort • dramatic reduction of state-led intervention in technological development • Korea • Growing efforts and initiatives in terms of R&D • Shift from Learning System towards Innovating System (defining strategic fields of intervention)‏ • … even if common trends can be pointed out • Liberalization and growing space for private initiatives • R&D more and more oriented towards shorter term applications  but Korea is resisting better to those trends

  27. 3- Innovation systems: ICT and telecommunications • general context since the mid-nineties • Liberalization of the telecommunications industry • Strong ICT growth • In brief • The Korean IS is quite consistent… • … while French IS is characterized by a « multi-sided institutional dualism »

  28. 3- Innovation systems: ICT and telecommunications • In Korea • Fostering competition… • … but competition is consistent with innovation and industrial policies • No independent regulator of the telecommunications industry • KCC depends on the Ministry of Information and Communications (MIC) and will be merged with KBC (in charge of contents)‏ • Governmental agencies (depending on MIC) implement political priorities: • Defining policies (KISDI). • Organizing public/private R&D partnerships (ETRI)‏ • Managing and financing innovation (IITA)‏

  29. 3- Innovation systems: ICT and telecommunications • Strategic and important orientation defined by the State • For the operators: • Promotion of facility-based competition (this policy was helped by the high density of the population)‏ « no » unbundling of the new infrastructures • Infrastructure : allows technological differentiation • Unbundling only on previous generation infrastructure in order to push competitors to adopt new techniques • For equipment manufacturers • Limitation of FDI during a large period • Public investments, support for « national champions », incentives to develop ICT manufacturing sectors (See the exemple of WCDMA et CDMA 2000 licensing)‏ • Development of local standards in order to protect the national market

  30. 3- Innovation systems: ICT and telecommunications

  31. 3- Innovation systems: ICT and telecommunications • Exemples of programs • KII (started in 1995, already ended)‏ • IT 839 : 8 services, 3 infrastructures et 9 technologies (in progress)‏ • Large ICT education programs, research… • Aims • Higher GDP per capita • Employment • Position Korea on strategic fields (for international competition)‏

  32. 3- Innovation systems: ICT and telecommunications • In France • Multi-sided institutional “dualism” between • a) institutions in charge of competition and institutions in charge of innovation • b) national and european institutions • c) even between contents and telecoms regulations • a) In the mid-nineties: liberalization of the industry • France Télécom (DGT) is loosing its position at the top of an « industrial hierarchy » With its own advanced research center (CNET) and stong partnerships with equipment players (Alcatel et Thomson)‏, research centers and « universities » • Creation of an independent NRA with the main goal of developing competition (considered as the way to improve efficiency)‏ • This independant NRA may induce counterproductive effects on innovation and thus dynamic efficiciency. Why ?

  33. 3- Innovation systems: ICT and telecommunications • Specificities of sectoral regulation in France • Asymmetrical regulation in order to favor the entrance and the development of FT competitors • Three ideas • FT retail prices should be too low ( prevent « squeezing »)‏ • Wholesale prices not to high (cost oriented and non discriminatory prices)‏ ( resale of FT services and development of competitors market shares)‏ • Favoring « ladders of investment » climbing for competitors • Progressive replication of networks • Tools: bitstream access, unbundling… • Asymmetrical regulation should then disappear (and should be replaced by the only application of competition law)‏

  34. 3- Innovation systems: ICT and telecommunications • Main outcomes • Lower incentives to invest • Into new infrastructures • For the incumbent (which value option “invest” into new techniques is reduced by the possible unbundling of its NGN) • For the competitors (unbundling can be a better solution than investing) • Into R&D • Reduction and transformation of R&D effort by operators (FT)… • Lower effort: From 3.5% of the revenue in 1997 to 1% in 2003 (according to OECD)‏ • R&D more oriented on short term applied projects and services • equipment manufacturers are realizing a part of R&D previously realized by FT • but equipment manufacturers R&D and public R&D spending do not compensate the lower efforts of FT

  35. 3- Innovation systems: ICT and telecommunications • The two other important institutional dualisms • b) between national and european institutions This is true both in terms of • Pro-competitive sector specific regulation • Innovation policies • Sprinkling european fundings dedicated to R&D • No clear industrial strategy at the EU level (public orders, national specializations…)‏ • c) between contents and telecoms regulations • Digital dividend and convergence in the ICT ecosystem should induce more coordination

  36. 3- Innovation systems: ICT and telecommunications • While in Korea… • Sector specific institutions are all depending on the ministry (MIC) (which can coordinate competition and innovation oriented policies)‏ • Able to gather stakeholders around a common strategic vision • The priorities are implemented through coherent incentives to innovate and to invest with a medium-long term perspective (with the risk of an excess of investment?)‏ • This vision gathers a top-down and a bottom-up approach thanks to MIC coordination • This support from MIC to innovation can get the upper hand on pro-competitive policies. • Conversely, pro-competitive policies are mainly guided by innovation and investment logics.

  37. 4- Conclusions et perspectives • Divergent paths in terms of performances between countries • Looking for explanations in the institutional arrangements (at national and sectoral levels) • Institutional consistency in Korea • Multi-sided institutional dualisms in France • competition/innovation • France/UE • Telecommunications/content… • In France, these institutional dualism reinforce the negative effects that results from • the change in the governance of the IS (de-verticalization and bottom-up approaches)

  38. 4- Conclusions et perspectives • The regulator should thus • take more into account innovation problems instead of only fostering effective competition  • understand that fostering competition is one of many other tools • be in charge of an industrial and innovation policy (which is not the case for the moment) • In France, the regulator (ARCEP) seems to be more and more interested by investment and innovation but…

  39. 3- Innovation systems: ICT and telecommunications • ETRI fields of interest

More Related