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Understanding the Relationship between Knowledge and Competitiveness in the Enlarging European Union

Final Report Summary - U-KNOW (Understanding the Relationship between Knowledge and Competitiveness in the Enlarging European Union)

U-KNOW has brought together a large number of researchers from Eastern and Western European countries as well as from South Africa to work on questions related to technological change, innovation, human capital, intellectual property rights and the internationalisation of research and development. Thereby, a focus on the transition of S&T systems in post-transition economies as well as their economic integration into the EU played a particularly important role.

The overarching research question, underlying the U-KNOW project, was, to what extent are factors such as specific types of knowledge, institutional arrangements, organisational conditions, incentive systems, cognitive flexibility, as well as network alignment: a source of the public and private good properties of knowledge, fostering or hindering knowledge creation and use, drivers or barriers to knowledge transfer and innovation, and finally shaping new understandings of knowledge itself.

The U-KNOW project focused on the interrelatedness of the enterprise, public science / higher education, and governmental spheres. They applied the 'network alignment' approach as a tool to understand the role of knowledge for European competitiveness. Network alignment has arguably been a key ingredient for economic growth in some East Asian countries. Building on this experience, the research team undertakes comparative studies to identify missing, anti-developmental or misaligned networks in selected industrialised and transitional European economies. Thereby, they took sectoral, regional, as well as economy wide perspectives. This constitutes a key underpinning for extensive policy development.

The existing literature suggests different approaches with respect to connections between socio-cultural attitudes and the innovation performance of a company. According to this they include these patterns and their impacts on different levels: the national level, the organisational / corporate level and, rudimentarily the professional level. On each level one can distinguish different factors in order to enable several econometric analyses. All studies show significant results and underpin the relevance of this topic. However, the literature sometimes might be too abstract or too theoretically, what makes it difficult to make any suggestions to policy makers or managers to improve innovation surroundings and performances. Thus, we tried to get a more direct insight by consulting two local firms in the East German chemical industry. By interviewing them about the different factors suggested by the literature, we found evidence for all levels of socio-cultural factors and their influence on innovation.

Firstly, it is important to say that all different approaches, the literature gives, blur in the everyday live experience of the experts. That means that all levels or cultures, which are defined in the literature cannot be seen as separate, but are interpedently connected to each other.

On the level of national cultures, the experts found the institutional framework as the most important factor. According to the 'innovation system' approach, these institutions are directly and 'interdependently' connected to the socio-cultural attitudes of the citizens. According to this it is absolutely possible to distinguish between certain regions (countries), which are connected to certain socio-cultural attitudes and their positive or negative influence on innovation performance. Moreover, policy makers can use their influence to promote institutions and frameworks which foster those socio-cultural patterns that can improve the innovation process.

Organisational / corporate culture does also have an impact on the innovation performance of a company. In the sense of the experts, one of the most important distinctions can be observed between tightly -and loosely controlled units. According to this there is not one truth, because different industries and innovation units within one company have to be up to different standards and requirements. However, it seems always most effective to create a healthy mixture of specialisations, gender, ages, and nationalities to realise innovations. The role of socio-cultural patterns, in this case, is very complex and cannot be effectively analysed within this framework. At least one might evaluate how the different nationalities fit best in different corporate cultures.

On the individual level of socio-cultural factors, the experts made the most distinctive experiences. They directly mention frictions in connection with cultural differences. Moreover, it is a vital part of their management activities to mix different nationalities, professions etc. to foster innovation. According to this, there seems to be a trade-off between a vital innovative atmosphere connected to a high diversification of socio-cultural imprinting and high costs of arranging socio-cultural differences in a company.

The paper concludes that many of the countries in the enlarging European Union have moved from agenda setting and formulation to implementation and learning, though at very different speeds. A third-generation (3G) innovation policy of the kind being promoted in this deliverable has properties that involve broad-based inclusiveness in the system responsible for innovation: multi-sectoral (in both vertical and particularly horizontal senses), multi-functional (combining S&T functions with organisational, financial and market-related demand functions), and multi-regional (combining activities at various spatial levels). Policy-makers at all territorial levels (local, regional, national and supranational) have to develop the interactive dynamic capabilities to bring coherence and consistency to the innovation system. The complete attainment of network alignment is a U-KNOW improbability, given the multiplicity of goals, instruments, agents and networks involved. It is quite likely to be undesirable to reach any such optimum, because the costs of striving for perfection at the margin may well exceed the benefits.

Nevertheless, at the heavily infra-marginal level at which most existing network structures probably operate, there is often much to be said in favour of aiming to do better - rather than achieving best practice we might follow evolutionary thinking in advocating the objective of better practice. While the fulfilment of policy alignment remains something of a pipe dream, the U-KNOW project has aimed to present a host of practical ways in which current practices could be substantially improved, even if not perfected. The consortium took the opportunity to present these recommendations in form of policy papers at the final project conference which was jointly organised with the Leibniz Association in Brussels in February 2009. All papers were directly commented by relevant policy-makers mainly from the European level as well as selected external scientist including members of the scientific advisory board of the U-KNOW project.