NOT F O R QUOTATION W I T H O U T PERMISSION O F THE AUTHOR
INNOVATION AND INDUSTRIAL STRATEGY
H e i n z - D i e t e r H a u s t e i n
May 1 9 8 1 WP-81-65
To be p r e s e n t e d a t t h e Workshop on I n n o v a t i o n Management
J u n e 22-25, 1981
W o r k i n g Papers a r e i n t e r i m r e p o r t s o n work o f t h e I n t e r n a t i o n a l I n s t i t u t e f o r A p p l i e d Systems A n a l y s i s and have r e c e i v e d o n l y l i m i t e d r e v i e w . Views o r o p i n i o n s e x p r e s s e d h e r e i n do n o t n e c e s s a r i l y r e p r e - s e n t t h o s e of t h e I n s t i t u t e o r o f i t s N a t i o n a l Member O r g a n i z a t i o n s .
INTERNATIONAL INSTITUTE F O R APPLIED SYSTEMS ANALYSIS
A-2361 Laxenburg, A u s t r i a
PREFACE
The conditions and consequences of industrial development are currently being widely discussed. One reason for this attention is the marked decline in industrial growth rates in many countries of the world, including those with low levels of industrialization.
Aware that the successful management of innovation might be a cornerstone in solving the problem of industrial growth in both the market and planned economies, the members of IIASA's Innovation Management Task held a task force meeting on
"Innovation and Industrial Strategy" in 1980. This paper is the completely revised version of my contribution to this
meeting. It gives an overview of the problem of innovation and industrial growth at the global, national, and sectoral levels from the standpoint of our findings in innovation research.
T h i s p a p e r was p r e p a r e d o n t h e b a s i s o f a T a s k F o r c e M e e t i n g h e l d i n J u n e 1 9 8 0 o n I n n o v a t i o n a n d I n d u s t r i a l S t r a t e g y , w h i c h was o r g a n i z e d by t h e a u t h o r .
G r a t i t u d e i s e x t e n d e d t o W a l t e r G o l d b e r g o f Sweden, H a r r y M a i e r o f t h e G D R , N i k o l a i J . L a p i n o f t h e USSR, a n d Z o l t a n Roman o f Hungary f o r t h e i r u s e f u l s u g g e s t i o n s a n d a d v i c e .
CONTENTS
INTRODUCTION
INDUSTRIAL POLICY, INDUSTRIAL STRATEGY, AND POLICY ON INNOVATION
2 . 1 T y p e s of I n d u s t r i a l P o l i c y and t h e S t a g e s o f I n d u s t r i a l D e v e l o p m e n t
2 . 2 T h e Main C o m p o n e n t s o f I n d u s t r i a l P o l i c y and R e c e n t P r o b l e m s
2 . 3 P u s h and C o m p e n s a t i o n P o l i c i e s and T h e i r I n t e r a c t i o n
2 . 4 D i f f e r i n g A t t i t u d e s T o w a r d I n n o v a t i o n P o l i c y i n V a r i o u s C o u n t r i e s
3 . INDUSTRIAL DEVELOPMENT AT THE GLOBAL LEVEL: TRENDS, O B J E C T I V E S , AND STRUCTURAL CHANGES
3 . 1 I n n o v a t i o n and L o n g - t e r m C y c l e s i n I n d u s t r y 3 . 2 I n t e r a c t i o n b e t w e e n S o c i o e c o n o m i c G o a l s and I n d u s t r i a l S t r u c t u r e i n G r o u p s of C o u n t r i e s 4 . INNOVATION AND INDUSTRIAL DEVELOPMENT AT THE
NATIONAL LEVEL
5 . INNOVATION AND RELATIVE E F F I C I E N C Y AT THE SECTORAL LEVEL: THE CASE OF THE CHEMICAL INDUSTRY I N THE GERMAN DEVOCRATIC REPUBLIC
6 . A PROPOSED METHODOLOGY FOR STUDYING THE EFFECT OF
INNOVATIONS ON INDUSTRIAL GROWTH AND E F F I C I E N C Y
7 . L I S T OF TABLES 8 . L I S T OF FIGURES 9 . REFERENCES
INTRODUCTION
The q u e s t i o n o f i n d u s t r i a l p o l i c y a n d i n d u s t r i a l s t r a t e g y i s n o t new. The e c o n o m i c g r o w t h o f i n d u s t r i a l i z e d c o u n t r i e s h a s b e e n c l o s e l y l i n k e d w i t h i n d u s t r i a l d e v e l o p m e n t f o r more t h a n 200 y e a r s . T h e s e t i e s w i l l e n d u r e , d e s p i t e t h e i n c r e a s i n g i m p o r t a n c e o f t h e t e r t i a r y s e c t o r ; p o l i c y m a k e r s i n a d v a n c e d
c o u n t r i e s do n o t t h i n k i n t e r m s o f a p o s t - i n d u s t r i a l i z e d s o c i e t y . What i s s o u g h t i s i n d u s t r i a l p o l i c y t h a t c a n e n s u r e f u r t h e r
g r o w t h i n a l l s e c t o r s o f t h e n a t i o n a l economy.
I n d u s t r i a l g r o w t h i s a c o m b i n a t i o n o f p u s h p r o c e s s e s t h a t e l i m i n a t e e q u i l i b r i a a n d c o m p e n s a t o r y p r o c e s s e s t h a t c r e a t e them.
S o m e t i m e s , however, i m b a l a n c e s become s o s e v e r e t h a t t h e y c a n n o l o n g e r b e c o r r e c t e d w i t h s i m p l e c o m p e n s a t o r y m e a s u r e s .
S e v e r a l k i n d s o f i m b a l a n c e a r e i m p e d i n g i n d u s t r i a l g r o w t h a t p r e s e n t :
1 . t h e e n e r g y i m b a l a n c e , c a u s e d by t h e d e p l e t i o n o f v a l u a b l e n o n r e n e w a b l e e n e r g y r e s o u r c e s ,
2. t h e m a t e r i a l i m b a l a n c e , c a u s e d by t h e d e p l e t i o n o f v a l u a b l e n o n r e n e w a b l e m i n e r a l r e s o u r c e s ,
3 . t h e t e c h n o l o g i c a l i m b a l a n c e , c a u s e d by d i s c o n t i n u o u s t e c h n o l o g i c a l p r o g r e s s ,
4 . t h e e c o l o g i c a l i m b a l a n c e , c a u s e d by i n t e n s e c o m m e r c i a l e x p l o i t a t i o n o f o u r n a t u r a l e n v i r o n m e n t w i t h o u t r e g a r d t o l o n g - t e r m c o n s e q u e n c e s ,
5 . t h e s o c i a l i m b a l a n c e , c a u s e d by n e g l e c t o f human re- s o u r c e s t h r o u g h i l l i t e r a c y , unemployment, a n d o t h e r f a c t o r s , and
6 . t h e p o l i t i c a l i m b a l a n c e , c a u s e d by a c c e l e r a t i o n o f t h e arms r a c e a n d o t h e r f a c t o r s .
T h e s e i m b a l a n c e s form a c o m p l i c a t e d p i c t u r e t h a t c a l l s f o r a p o l i c y o f c o m p e n s a t i o n t o r e d u c e b o t t l e n e c k s a n d e n s u r e a new e q u i l i b r i u m .
But h e r e w e a r e f a c e d w i t h a m a j o r p r o b l e m , f o r t h e p r e s e n t n e t w o r k o f i m b a l a n c e s c a n n o t b e overcome w i t h t r a d i t i o n a l
p o l i c i e s o f c o m p e n s a t i o n o r improvement. W i t h o u t a m a j o r p u s h t o w a r d b a s i c i n n o v a t i o n s , g r o w t h r a t e s w i l l c o n t i n u e t o d e c l i n e a s t h e y h a v e i n t h e p a s t d e c a d e (see T a b l e 1 ) . Thus i n d u s t r i a l s t r a t e g y h a s become a s u b j e c t o f i n t e r n a t i o n a l d i m e n s i o n .
I n t h i s p a p e r t h e l i n k b e t w e e n i n d u s t r i a l s t r a t e g y a n d p o l i c i e s on i n n o v a t i o n i s d e s c r i b e d . The p a p e r i s i n t e n d e d a s a c o n t r i b u t i o n t o a f u t u r e f o c a l t a s k a t t h e I n t e r n a t i o n a l
I n s t i t u t e f o r A p p l i e d S y s t e m s A n a l y s i s ( I I A S A ) . I t was e l a b o r a t e d on t h e b a s i s o f a d i s c u s s i o n w i t h e x p e r t s from IIASA, t h e U n i t e d S t a t e s , t h e U n i t e d Kingdom, Hungary, t h e F e d e r a l R e p u b l i c o f Germany, Sweden, a n d t h e German D e m o c r a t i c R e p u b l i c d u r l n g t h e Task F o r c e M e e t i n g on I n d u s t r i a l S t r a t e g y and I n n o v a t i o n P o l i c y . D u r i n g t h i s d i s c u s s i o n , i t was a g r e e d t h a t t h e p r o b l e m s h o u l d b e a n a l y z e d a t t h e g l o b a l , r e g i o n a l , n a t i o n a l , a n d s e c t o r a l l e v e l s .
Table 1. Industrial growth rates in 32 countries (1960-1978).
Sources: World Development Report 1980. Statistical Yearbook of CMEA Countries 1979.
A. Developing Countries Low Income Countries 1. Bangladesh
2. Ethiopia 3. Somalia 4. Mozambique 5. India
6. Pakistan 7. Angola 8. Indonesia
Middle Income Countries 9 * Egypt
10. Thailand 11. Bolivia
12. Syrian Arab Republic 13. Republic of Korea 14. Turkey
15. Mexico 16. Argentina
B. Planned Economies 17. Bulgaria .
18. Czechoslovakia
19. German ~emocratic Rep.
20. Hungary 21. Mongolia 22. Poland 23. Romania 24. USSR
C. Developed Market Economies 25. United States
26. Canada 27. France 28. Italy
29* Federal Rep. of Germany 30. Austria
31. United Kingdom 32. Japan
Average annual industrial growth rates (in
1960-1370
7.9 7.4 3.3 9.5 5.5 10.0 11.0 5.0 5.4 11.6 6.2 6.3 17.2 9.6 9.1 6.0
11.3 6.0 6.1 6.8 9.9 8.4 12.8 8.5
5.2 6.8 6.4 6.2 5.2 4.9 3.1 10.9
percent) 1970-1978
5.9 0.4 -2.6 -5.1 4.5 4.8 -4.1 11.2 7.2 10.2 5.1 11.6 16.5 8.8 6.2 2.2
8.1 6.2 6.0 6 .O 8.0 10.2 12.0
6.5
2.7 3.7 3.5 2.7 2.1 3.4 1.3 6.0
Difference
-2.0 -7.0 -5.9 -14.6 -1.0 -5.2 -15.1 6.2 1.8 -1.4 -1.1 5.3 -0.7 -0.8 -2.9 -3.8
-3.2 0.2 -0.1 -0.8 -1.9 1.8 -0 ..8 -2.0
-2.5 -3.1 -2.9 -3.5 -3.1 -1.5 -1.8 -3.1
INDUSTRIAL POLICY, INDUSTRIAL STRATEGY, AND POLICY ON INNOVATION
Industrial strategy, a part of industrial policy, comprises the set of goals, tools, and measures designed to meet long-term national requirements for industrial development. Industrial policy is embedded in national economic and social policy.
Policy on innovation has a direct but historically changing link with industrial strategy, as (1) dynamic industrial develop- ment is impossible without innovation and (2) industrial cycles and structural changes are closely linked with the innovation cycle. It is difficult to characterize generally innovation policy and innovation policy, as they have been treated very differently in international literature.
Types of Industrial Policy and the Stages of Industrial Development There are at present at least seven kinds of industrial
policy:
1. Industrial policy as the policy of the enterprise
without direct state involvement. Denmark has this kind of policy.
2. Industrial policy as sectoral policy. An example is the Dutch experience, where in the 1960s, certain in- dustries were promoted through governmental aid.
3. Industrial policy as policy for nationalized indus- tries. An example is Austria, where the steel and several other industries have been nationalized.
4. Industrial policy that promotes every type of enter- prise except large corporations. The Netherlands launched such a program in 1975 (de Wolff 1980).
5. Industrial policy as corporate policy. In countries with large multinational corporations, industrial policy is made primarily by the corporations them- selves rather than by the government. This is typical for the US. However, there is some question as to the limits of this approach (Hirschhorn 1980).
6. Industrial policy in newly industrialized countries as a set of measures that include direct government involvement. Examples are Elexico and Brazil.
7. Industrial policy as part of national economic policy and planning in the socialist countries ( e s i k o s - ~ a ~ ~
1980). The USSR has the longest history of the type of policy.
Each of these kinds of policy is linked to a particular industrial stage. In the course of its history, industry has passed through a number of stages:
--
During the pre-industrial stage, primary production dominated, and agriculture and trade were the only industries.--
The industrial revolution was a transitory stage during which rapid development of textile production wasfollowed by the introduction of the machine tools
industry. The classical example for this is England from 1770 to 1840.
--
In the monocultural stage, one or more industries dominated and a large proportion of industry became extractive. This was the stage of primary mechani- zation. The monocultural stage flowed into a transi- tion stage during which more and more industries were established: the so-called metal cycle moved fromiron ore and metallurgy to mechanical engineering and the railroad industry. Industries in and around the textile and metal cycles dominated. This was also a stage of advancing mechanization.
--
The industrial-complex stage, characterized by rapid growth in chemical, automobiles, aircraft, and electro- technology, was seen in the advanced industrialized countries from 1920 to 1970. The period alsomarked the beginning of automation.
--
The highly-specialized industrial complex stage stresses research and development. Industries have become very competitive on the world market. This stage is typical of the most advanced industrialized countries, such as the USA, Japan, and the FRG.--
The next (future) stage of industrial growth might be characterized by an amalgamation of future industries with other sectors of the national economy. Thus thespiral is closing and industry is returning to the starting point, but at a higher level.
The stage a country has reached can be determined by various indicators (see Table 2). The gross domestic product (GDP) per capita, the per capita consumption of electric power, and
industry's share of all employed persons are indicators of the economic level of the country as a result of industrialization.
Table 2. Some indicators reflecting historical stages of industry.
1. Preindustrial
2. Transitional
I
3 . Monocultural
4. Complete industrial complex
5. Highly
specialized industrial complex 6. Future
Textiles Extractive industry, metal cycle, railroads Chemicals, automobiles, aircraft,
1
electrotechnology,
ElectronicsBioindustry?
I
CIanuf acturing industry's share in GDP
(in percent)
Industry's share in total
work force Group A's
share in industry
< 2 0 2 0 - 3 5
3 0 - 4 0
6 0 - 7 5
6 0 - 7 5
6 0 - 7 5
Source: Own estimates according to various statistical sources
.
Growth o f i n d u s t r i a l p r o d u c t i v i t y , i n d u s t r y ' s s h a r e o f t h e G D P , t h e s h a r e o f a l l i n d u s t r i e s p r o d u c i n g t h e means o f p r o d u c t i o n , and t h e s h a r e o f f o o d and t e x t i l e i n d u s t r y i n a l l i n d u s t r y a r e i n d i c a t o r s o f i n d u s t r i a l a c t i v i t y . The s h a r e o f p r i m a r y
p r o d u c t i o n ( a g r i c u l t u r s and m i n i n g ) i n t h e GDP i s a n i n d i - c a t o r o f a c o u n t r y ' s raw m a t e r i a l r e s o u r c e s . The s h a r e o f t h e GNP s p e n t on r e s e a r c h and development and t h e number o f p a t e n t s r e g i s t e r e d a n n u a l l y i n d i c a t e t h e l e v e l o f i t s t e c h n o l o g y .
F o r e i g n t r a d e a c t i v i t y i s i n d i c a t e d by i n d u s t r i a l e x p o r t p e r c a p i t a .
R e c e n t l y K e i t h P a v i t t ( 1 9 7 9 , 1980) made a c o m p a r i s o n of s e v e r a l c o u n t r i e s who a r e i n t h e two most r e c e n t s t a g e s o f i n d u s t r i a l d e v e l o p m e n t . H e d i s t i n g u i s h e s among f i r s t d i v i s i o n c o u n t r i e s , s u c h a s t h e US, t h e FRG, Sweden, and S w i t z e r l a n d ; second d i v i s i o n c o u n t r i e s , s u c h a s J a p a n , F r a n c e , Belgium, t h e U K , and Canada; and t h i r d d i v i s i o n c o u n t r i e s , i n c l u d i n g I t a l y , S p a i n , a n d o t h e r s . The i n d i c a t o r s h e u s e d w e r e p r o d u c t i v i t y i n m a n u f a c t u r i n g , US p a t e n t s p e r c a p i t a , i n d u s t r i a l s p e n d i n g on R & D ( p e r c a p i t a and i n a b s o l u t e f i g u r e s ) , e x p o r t s p e r c a p i t a , and u n i t v a l u e o f m a n u f a c t u r i n g e x p o r t s . I t s h o u l d be n o t e d h e r e , however, t h a t w h i l e t h e s e i n d i c a t o r s show t h e g e n e r a l p o s i t i o n o f a c o u n t r y ' s i n d u s t r y , o n e must a l s o l o o k a t t h e c o u n t r y ' s s e n s i t i v i t y t o c r u c i a l w o r l d p r o b l e m s o f i n d u s t r i a l d e v e l o p m e n t .
The Main Components o f I n d u s t r i a l P o l i c y and R e c e n t Problems A c o u n t r y ' s i n d u s t r i a l p o l i c y and i n d u s t r i a l s t r a t e g y depend on i t s s o c i o e c o n o m i c s y s t e m , i t s s i z e , and t h e s t a g e o f i t s i n d u s t r i a l d e v e l o p m e n t . The main components o f i n d u s t r i a l p o l i c y a r e :
--
g o a l s and t a r g e t s ,--
a v a i l a b l e means and r e s o u r c e s ,--
a v a i l a b l e m e a s u r e s ,--
main a r e a s o f a p p l i c a t i o n ,--
s t a t u s and a c t i v i t i e s o f i n d u s t r i a l o r g a n i z a t i o n s , and--
i n t e r a c t i o n w i t h economic p o l i c y a s a whole.Problems a r i s e , p r i m a r i l y from t r a d e - o f f s among t h e s e components, and from t r a d e - o f f s between i n d u s t r i a l d e v e l o p m e n t and t h e d e v e l o p m e n t o f n o n - i n d u s t r i a l s e c t o r s o f t h e economy.
A t p r e s e n t , t h e whole n e t w o r k o f i n d u s t r i a l p r o b l e m s i s
c e n t e r e d a r o u n d t h e p r o d u c t i v i t y i s s u e . The w o r l d w i d e d e c l i n e i n t h e g r o w t h r a t e o f p r o d u c t i v i t y i s b o t h t h e c a u s e a n d c o n s e - quence o f many o t h e r p r o b l e m s , i n c l u d i n g :
--
i n c r e a s i n g c o m p e t i t i o n i n t h e f i e l d o f advanced t e c h n o l o g y and i n o t h e r f i e l d s ,--
s h o r t a g e s o f e n e r g y and raw m a t e r i a l s ,--
s a t u r a t i o n o f t h e m a r k e t i n c e r t a i n f i e l d s ,--
s u b s t i t u t i o n o f m a t e r i a l s ,--
p e r s i s t e n t i n f l a t i o n and unemployment,--
p r o b l e m s o f s o c i a l e n v i r o n m e n t ( p u b l i c t r a n s p o r t , edu- c a t i o n , h e a l t h s t a n d a r d s , working c o n d i t i o n s ) ,--
damage t o t h e n a t u r a l e n v i r o n m e n t , and--
growing m i l i t a r y e x p e n d i t u r e s ( s e e , f o r e x a m p l e , Hamilton 1978, Roman 1 9 7 9 ) .But how t h e s e i s s u e s a r e r a n k e d i n i m p o r t a n c e v a r i e s
among c o u n t r i e s , and among g r o u p s o f c o u n t r i e s . T h i s i s shown i n T a b l e 3 f o r 15 o f t h e m a j o r p r o b l e m s .
I n s e e k i n g s o l u t i o n s t o problems o f i n d u s t r i a l p o l i c y , more and more c o u n t r i e s a r e t u r n i n g t o t h e i r p o l i c i e s on
i n n o v a t i o n . I n n o v a t i o n p o l i c y i n t h e c o n t e x t o f i n d u s t r i a l p o l i c y s e e k s s o l u t i o n s t o t h e f o l l o w i n g q u e s t i o n s :
1 . What c h a n g e s i n t e c h n o l o g y c a n b e e x p e c t e d and how c a n t h e y h e l p overcome m a j o r g a p s and b o t t l e n e c k s and t h e r e b y i n c r e a s e p r o d u c t i v i t y ? What s h o u l d b e improved h e r e ?
2 . What c o n t r i b u t i o n can i n d u s t r y make t o w a r d s o l v i n g f u t u r e p r o b l e m s o f p r o d u c t i v i t y ? What s t r u c t u r a l c h a n g e s a r e d e s i r a b l e and p o s s i b l e ?
3 . What k i n d s o f i n n o v a t i o n a r e d e s i r a b l e and a t what r a t e s h o u l d t h e y b e i n t r o d u c e d ?
4 . What m e a s u r e s a r e a v a i l a b l e f o r a s s e s s i n g i n n o v a t i o n p o l i c i e s ? What c o u l d be done t o improve t h e e f f i - c i e n c y o f t h e s e m e a s u r e s ?
I n n o v a t i o n p o l i c y a c t u a l l y h a s t h e same main components a s i n d u s t r i a l p o l i c y a s a w h o l e . I t s p r i m a r y o b j e c t i v e , however, i s n o t i n d u s t r i a l development a s a w h o l e , b u t r a t h e r i t s f i r s t d e r i v a t i v e i n t i m e .
Push and Compensation P o l i c i e s and T h e i r I n t e r a c t i o n
The q u e s t i o n o f economic e q u i l i b r i u m i s t h e r e a g a i n o f g r e a t i n t e r e s t . A p a p e r by G e r h a r d Mensch, Klaus Kaasch,
A l f r e d K l e i n k n e c h t , and R e i n h a r d Scnnapp ( 1980) on " I n n o v a t i o n T r e n d s and S w i t c h i n g between F u l l - and Underdevelopment
E q u i l i b r i a , 1950-1978" l i n k s t h e i n n o v a t i o n problems w i t h t h e dynamic s t a b i l i t y i n i n d u s t r i a l d e v e l o p m e n t . The a u t h o r s b e l i e v e t h a t p a r t i c u l a r l y t h e underemployment p r o b l e m a r i s e s from a c e r t a i n t y p e o f development i n i n n o v a t i o n and t h a t t h i s problem c a n be s o l v e d by a new wave o f b a s i c i n n o v a t i o n s . The a u t h o r s d i s t i n g u i s h between e x p a n s i o n a r y i n v e s t m e n t s (E) and r a t i o n a l i z i n g i n v e s t m e n t s ( R ) , a d i s t i n c t i o n which h a s b e e n u s e d i n West Germany f o r some t i m e . They l i n k t h e s e a r c h f o r t h e l a w s o r r e g u l a r i t i e s t h a t g o v e r n t h e d e v e l o p m e n t a l p a t h o f a n a t i o n a l economy w i t h t h e f i n d i n g s o f i n n o v a t i o n t h e o r y .
I n o u r o p i n i o n i t i s n e c e s s a r y and u s e f u l t o u s e i n n o v a t i o n t h e o r y f o r economic m o d e l i n g ; t h i s i s t r u e f o r m a r k e t economies a s w e l l a s f o r p l a n n e d economies.
I n p l a n n e d economies t h e t e r m " p r o p o r t i o n a l i t y " i s u s e d t o c h a r a c t e r i z e a c e r t a i n e q u i l i b r i u m , d e f i n e d a c c o r d i n g t o g i v e n p o l i t i c a l and economic o b j e c t i v e s . An u r g e n t p r a c t i c a l t a s k
i n p l a n n e d e c o n o m i e s i s t o d e t e r m i n e how t o a l l o c a t e i n v e s t m e n t s b e t w e e n p u s h p r o c e s s e s a n d c o m p e n s a t i n g p r o c e s s e s s o t h a t
a dynamic e q u i l i b r i u m b e t w e e n s u p p l y a n d demand, a n d b e t w e e n c a p i t a l a n d l a b o r i s e n s u r e d .
C o m p e n s a t i n g p r o c e s s e s l e a d t o a s t a t i c e q u i l i b r i u m b y
i m p r o v i n g e f f i c i e n c y . I n F i g u r e 1 t h i s i s shown f o r i n n o v a t i o n s i n p r o c e s s e s . When l o o k i n g a t t h e s t a g e s o f a p r o d u c t i o n s y s t e m , w e g e n e r a l l y f i n d c e r t a i n b o t t l e n e c k s i n p r o d u c t i v i t y o r i n
e q u i p m e n t p e r w o r k e r . By e a s i n g t h e s e b o t t l e n e c k s a g a i n s t t h e a v e r a g e o r maximum, w e c a n i n c r e a s e t h e p r o d u c t i v i t y o f t h e w h o l e s y s t e m . I f t h i s i s n o t d o n e , t h e n i n a r a p i d l y e x p a n d i n g s y s t e m , t h e b o t t l e n e c k w i l l draw l a b o r f r o m o t h e r a r e a s o f
p r o d u c t i o n . Sometimes t h i s i s a c c o u n t e d f o r i n c a l c u l a t i o n s o f a n e n t e r p r i s e ' s e f f i c i e n c y ; s o m e t i m e s i t i s n o t .
O p t i m a l e f f i c i e n c y c a n a l s o b e e s t i m a t e d f r o m t h e s t a n d - p o i n t o f t h e n a t i o n a l economy, by u s i n g , f o r e x a m p l e , a
n o r m a t i v e p a y b a c k p e r i o d . A s i m i l a r f e a t u r e i s t y p i c a l o f c o m p e n s a t i n g p r o c e s s e s i n t h e s u p p l y a n d demand o f g o o d s
( F i g u r e 2 ) . Here c o m p e n s a t i n g p r o c e s s e s a r e u s e d t o m e e t demand b e t t e r . T h i s i s d o n e by i n c r e a s i n g s u p p l y , p r o m o t i n g demand, a n d ( l a t e r ) r e d u c i n g o v e r c a p a c i t i e s .
I t i s w i d e l y r e c o g n i z e d t h a t c o m p e n s a t i n g p r o c e s s e s , w h i l e n e c e s s a r y , e v e n t u a l l y l e a d t o a s t a t i c e q u i l i b r i u m w i t h d i m i n i s h - i n g r e t u r n s . I n t h e s h o r t r u n , h o w e v e r , t h e y r e s u l t i n h i g h e r a b s o l u t e a n d r e l a t i v e e f f i c i e n c y t h a n p u s h p r o c e s s e s ; b y r e d u c i n g v a r i a n c e s i n t h e p r o d u c t i o n a n d s u p p l y s y s t e m s , e f f i c i e n c y i s i m p r o v e d .
P u s h p r o c e s s e s , on t h e o t h e r h a n d , i n t r o d u c e a q u a l i t a t i v e l y new t e c h n o l o g y i n t o t h e p r o d u c t i o n s y s t e m , a n d t h e r e b y c o m p l e t e l y c h a n g e t h e s t a t e o f t h e a r t . C e r t a i n b o t t l e n e c k s are r e l i e v e d , a n d i n t h e p r o c e s s , a new v a r i a n c e w i t h new b o t t l e n e c k s i s
c r e a t e d . I n t h e l o n g r u n , p u s h p r o c e s s e s r e s u l t i n h i g h e r e f f i - c i e n c y t h a n c o m p e n s a t i n g p r o c e s s e s . S t a t i c e q u i l i b r i u m v a n i s h e s and new p o s s i b i l i t i e s f o r i m p r o v e m e n t s a r i s e .
Thus f o u r t y p e s o f i n v e s t m e n t c a n b e d i s t i n g u i s h e d : compen- s a t i o n i n v e s t m e n t s i n v o l v i n g p r o c e s s e s a n d t h o s e i n v o l v i n g p r o - d u c t s , a n d p u s h i n v e s t m e n t s i n v o l v i n g p r o c e s s e s a n d t h o s e i n v o l - v i n g p r o d u c t s .
A c c o r d i n g t o Mensch e t a 1 ( 1 9 3 0 ) , t h e p r e s e n t d e c l i n e i n p r o d u c - t i v i t y g r o w t h r a t e s i s d u e t o a stalemate i n t e c h n o l o g y , o r t h e
l a c k o f b a s i c i n n o v a t i o n s . T h i s would mean t h a t t h e r e h a v e b e e n h e a v y i n v e s t m e n t s i n c o m p e n s a t i o n o r improvement a n d a d i m i n i s h -
i n g p r o p o r t i o n o f p u s h i n v e s t m e n t s . T a b l e 4 shows t h e f r e q u e n c y d i s t r i b u t i o n o f 3 5 , 9 4 5 t e c h n o l o g i c a l c h a n g e s i n f o u r i n d u s t r i e s . D i s t r i b u t i o n o f t h e s e c h a n g e s i n p e r c e n t ( T a b l e 5 ) shows t h a t more t h a n t w o - t h i r d s o f t h e t e c h n o l o g i c a l c h a n g e s were o f a c o m p e n s a t o r y n a t u r e and i n v o l v e d t h e d e v e l o p m e n t o f p r o c e s s e s ; o n l y 5 p e r c e n t i n v o l v e d new p r o d u c t s .
An i n n o v a t i o n s t r u c t u r e o f t h i s n a t u r e i s bound t o l e a d t o a d e c l i n e i n p r o d u c t i v i t y ; t h o s e making p o l i c y a n d s e t t i n g p r i o r i -
A B C D E F G STAGES OF PRODUCTION PROCESS
Figure 1. Technological profile of a production process.
PRODUCTS
Figure 2. Supply and demand profile for a product group.
Table 4. Distribution of 35,945 technological changes in the plastics industry (1970), wood industry (1971), food industry (1972)
,
and metal industry (1973)according t o type of change (in percent).
Source: Dostal et a1 (1977)
.
Reasons for
i
I
I I
9 . Implementation o f o t h e r p r o c e s s e s
1 0 . M e c h a n i z a t i o n a n d r a t i o n a l - i s a t i o n by a d d i t i o n a l d e v i c e s 11. Organizational change
BT
A T 1 0 0 0 2 0 0 0 0 0 1 0 0 0
B O 1 0 0 0 2 0 0 0 0 0 0 0 0 0
12. I n t r o d u c t i o n o f new m a t e r i a l and intermediate products
1 1
4
14 5
13. 1nt.roduction o f o t h e r forms of energy
14. Use o f a d d i t i o n a l equipment BT
Q ~ O O O O ~ O O O O O O O O O
A M 0 0 0 0 0 0 0 0 0 0 0 0 0 0
---
C O O O O O O O O O O O O O O O
15. Others
T o t a l 2 6 5 2 0 3 8 4 2 2 0 5 6 3 4 3 1 0 0
2 0 0 0 0 0 0 0 1 0
2 0
0
Table 5. Distribution o f 35,945 technological changes according to type of innovation and area affected (in percent)
.
Process Materials Organization
Product Equipment Energy and others Total
G T M 0
A Push 5 16 o 5 2 6
--
B Compensation 8 5 3 2 5 6 8
C Others o 3 o 3 6
-
Total 13 72 2 1 3 1 0 0
t i e s o n i n n o v a t i o n m u s t t a k e t h i s f a c t i n t o a c c o u n t . B u t a s s e e n i n T a b l e 6 , showing t h e r e s u l t s o f a n e n q u i r y o f t h e ECE i n t o p o l i c i e s on i n n o v a t i o n i n 16 c o u n t r i e s , i n o n l y a few cases i s t h e o r i e n t a t i o n t o w a r d b a s i c i n n o v a t i o n s and p u s h i n v e s t m e n t s .
D i f f e r i n g A t t i t u d e s Toward I n n o v a t i o n P o l i c y i n V a r i o u s C o u n t r i e s I n n o v a t i o n p o l i c y d i f f e r s i n m a r k e t a n d p l a n n e d e c o n o m i e s . The means a n d r e s o u r c e s a v a i l a b l e t o p o l i c y m a k e r s a l s o d i f f e r .
I n m a r k e t e c o n o m i e s t h e p r i m a r y o b j e c t i v e s o f p o l i c y o n i n n o v a t i o n i n c l u d e
--
m o b i l i z a t i o n a n d c h a n n e l i n g o f f i n a n c i a l r e s o u r c e s ,--
s u p p o r t f o r s m a l l e r e n t e r p r i s e s ,--
t h e b a l a n c e b e t w e e n R & D i n t h e p u b l i c s e c t o r a n d t h e d e v e l o p m e n t a l e f f o r t s o f i n d u s t r y , a n d--
p r o c u r e m e n t a c t i v i t i e s .I n p l a n n e d e c o n o m i e s , o n t h e o t h e r h a n d , i n n o v a t i o n p o l i c y s e e k s t o
--
see t h a t i n n o v a t i o n s c o n t r i b u t e t o p l a n t a r g e t s ;--
p r o m o t e i n t e r a c t i o n b e t w e e n t h e c e n t r a l l e v e l a n d i n d u s - t r i a l o r g a n i z a t i o n s i n t h e d e v e l o p m e n t o f i n n o v a t i o n s ;--
c o o r d i n a t e p l a n n i n g o f r e s e a r c h a n d d e v e l o p m e n t , i n v e s t - m e n t s , p r o d u c t i o n , a n d e f f i c i e n c y ; a n d--
a i d i n o r g a n i z i n g p r o g r a m s f o r i n n o v a t i o n i n i n d u s t r i a l p l a n n i n g .The p o l i c y m e a s u r e s u s e d t o p r o m o t e i n n o v a t i o n a l s o v a r y f r o m o n e c o u n t r y t o a n o t h e r . T a b l e 7 shows a s y s t e m a t i c o v e r v i e w o f t h e s e i n n o v a t i o n p o l i c y m e a s u r e s a n d t h e i r a r e a s o f a p p l i c a t i o n . T a b l e 8 shows more s p e c i f i c m e a s u r e s , t h e i r a r e a a n d t y p e , t h e
p h a s e o f t h e i n n o v a t i o n p r o c e s s i n w h i c h t h e y a r e g e n e r a l l y a p p l i e d , t h e i m p o r t a n c e o f t h e i r i m p l e m e n t a t i o n , t h e i r s t a g e s o f r a p i d g r o w t h a n d m a t u r a t i o n , a n d t h e e x t e n t t o w h i c h t h e y are u s e d i n g r o u p s o f c o u n t r i e s .
I t would b e u s e f u l t o e v a l u a t e t h e c o m p l e x i t y o f a c o u n t r y ' s p o l i c y f o r i n n o v a t i o n s by a n a l y z i n g t h e p r e s e n c e a n d i m p o r t a n c e o f a l l 3 2 m e a s u r e s . T a b l e 9 i s a f i r s t a t t e m p t a t s u c h a n a n a l - y s i s .
The c o m p l e x i t y o f i n n o v a t i o n p o l i c y a l s o d e p e n d s o n t h e a r e a s o f g r e a t e s t t e c h n o l o g i c a l c h a n g e . T a b l e 1 0 shows t h i s , u s i n g i n d u s t r y i n t h e GDR as a n e x a m p l e .
N a t i o n a l p o l i c y f o r i n n o v a t i o n i n t h e c o n t e x t o f i n d u s t r i a l p o l i c y m u s t t a k e i n t o a c c o u n t i n d u s t r i a l d e v e l o p m e n t a t t h e
g l o b a l l e v e l a n d i t s t r e n d s , o b j e c t i v e s , a n d s t r u c t u r a l c h a n g e s i n l i g h t o f t h e g l o b a l i n t e r d e p e n d e n c e o f n a t i o n a l e c o n o m i e s . F o r m u l t i n a t i o n a l c o r p o r a t i o n s t h i s r e f l e c t s t h e d i m e n s i o n o f
t h e i r s t r a t e g i c t h i n k i n g a n d s t r a t e g i c a c t i o n .
l'abie ti. V a r i o u s c o u n t r i e s f o r m u l a t e t h e i r p o l i c i e s o n i n n c v a t i o n a n d i d e n t i f y t h e i r p r i o r i t i e s .
1 . The l l e n t i f l c a t i o n of needs 3nd :he fcrrnuiation of long-term r e s e a r c h s t r a t e q y i s based on s o c i a l and econonis requiraments and r e s o u r c e s
(Austria)
.
2 . Research must be o r i e n t e d towards development of s o c i e t y , o r g a n i z a t i o n of reduction, and management and c o n t r o l (Norway)
.
3 . We need t o i d e n t i f y those c r i t i c a l a r e a s i n which i n v e s t s e n t of s c i e n t i f i c and t e c h n o l o g i c a l r e s o u r c e s l e a d s t o t h e g r e a t e s t e f f e c t (Canada).
4 . P r a c t i c a l and a p p l i e d r e s e a r c h should comply w i t h c u r r e n t p r o d u c t i o n needs (Poland)
.
5 . Research p r o j e c t s should be chosen s e r i o u s l y and c a r e f u l l y on t h e b a s i s of c r i t e r i a , t a k i n g i n t o account equipment of e n t e r p r i s e s and development of t h e country (Spain)
.
6 . I d e n t i f i c a t i o n of p r i o r i t i e s should t a k e i n t o account p o s s i b i l i t y of n a t i o n a l economic p o t e n t i a l (Belgium)
.
7 . S t r e s s i s being l a i d both on immediate economic and s t r a t e q i c iong-range u s e f u l n e s s ( F e d e r a l Republic of Germany).
8. P r i o r i t i e s should r e f l e c t demands of l o c a l and i n t e r n a t i o n a l markets (Belgium)
.
9 . Government p o l i c y should s t i m u l a t e high s t a n d a r d s of t e c h n o i o g i c a l i n n o v a t i o n s ( C z e c h o s l o v a k i a ) .
1 Survey of demand f o r new technology may provide a p i c t u r e of f u t u r e development (Netherlands )
.
11. Public i n f l u e n c e shouid p l a y a s t r o n g e r and more a c t i v e r o l e i n d e f i n i n g and implementing p r i o r i t i e s (Belgium).
12. S c i e n t i f i c and t e c h n o l o g i c a l work performed by v a r i o u s o r g a n i z a t i o n s , l a b o r a t o r i e s , i n s t i t u t i o n s
-
both p u b l i c and p r i v a t e-
and a l s o by i n d i v i d u a l r e s e a r c h e r s should be c o o r d i n a t e d (Luxembourg).13. I t i s n e c e s s a r y f o r s c i e n t i f i c i d e a s and t e c h n o l o g i c a l i n n o v a t i o n s t o be disseminated t o a number of a r e a s of t h e n a t i o n a l economy ( B u l g a r i a ) . 14. In coming y e a r s , i n d u s t r y w i l l need t o base i t s investment p l a n s on
t e c h n o l o q t o a much g r e a t e r e x t e n t than b e f o r e (United Kingdom).
15. Economic and t e c h n o l o g i c a l dependence on f o r e i g n c o u n t r i e s i s a c o n s t r a i n t t o r e s e a r c h a c t i v i t i e s (Spain)
.
16. The economy must be a d a p t a b l e t o innovation ( P o l a n d ) .
17. We need t o s t r e n g t h e n t h e n a t i o n a l economy's a b i l i t y t o c r e a t e , a b s o r b , and adopt contemporaty technology (Turkey).
3 . Newly s e l e c t e d R and D p r o j e c t s s u s t be e f f e c t i v e ( P o l a n d ) . 13. Innovations should c o n t r i b u t e t o t h e completion of t h e investment
program (Romania)
.
20. Innovation should h e l p s o l v e problems of e n v i r o m e n t , working c o n d i t i o n s , h e a l t h , and o t h e r s o c i a l problems (Czechoslovakia).
21. The need is t o maintain and p r o t e c t environmental q u a l i t y (Canada).
22. Innovations should n o t be abused and u n d e s i r a b l e s i d e - e f f e c t s should be prevented (Sweden).
S o u r c e : S t r u c t u r e a n d Change i n E u r o p e a n I n d u s t r y ( 1 9 7 7 )
.
I
I
e I 0 0) I 0 E rO C
c 0 "
0 Ll u m
u 4 1 O h 0 m > & 0 "
0 c o a ' bl r l a ' c , u u m c ,
u c & c u m O O Q a 4 0 3 vl-4 E a s c , a c; I n ;
T a b l e 8 . M e a s u r e s u s e d i n i n n o v a t i o n p o l i c y a n d t h e i r c h a r a c t e r i s t i c s .
I m p o r t a n c e d u r i n q F r e q u e n c y o f a p p l i c a t i o n i n
I
~ e v 6 l o p e d D e v e l o p e d 1 M a r k e t P l a n n e d D e v e l O l l i n~
E c o n o m i e s E c o ~ ~ o n ~ i e s C o u n t r i e s
No. M e a s u r e Implemen- R a p i d M a t u r -
Area* ~ ~ ~ e * * ~ h a s e I t a t i o n Growth a t io n
G r a n t s C s u b s i d i e s L o a n s
J o i n t v e n t u r e s F i n a n c i n g o f new
e n t e r p r i s e s
I n c e n t i v e s f o r i n v e n t o r s I n c e n t i v e s f o r o r g a n i z a t i o n C e n t r a l p l a n n i n g o f s t a t e
owned e n t e r p r i s e s P a t e n t s
E n v i r o n m e n t a l r e g u l a t i o n s Monopoly l a w s
Technical a s s i s t a n c e G o v e r n m e n t a l p r o g r e s s
I n f o r m a t i 0 1 1 n e t w o r k I n f o r m a t i o n c e n t e r s E x h i b i t i o n s
A d v i s o r y s e r v i c e s S t a t i s t i c a l s e r v i c e s I n f o r m a t i o n c a m p a i g n s R e s e a r c h a s s o c i a t i o n I n d u s t r i a l p a r t i c i p a t i o n H i g h e r e d u c a t i o n
P r o c u r e m e n t a c t i v i t i e s S t a n d a r d i z a t i o n
" S m a l l F i r m s " p o l i c y G o v e r n m e n t p r o j e c t s D e p r e c i a t i o n r u l e s T r a d e r e s t r i c t i o n s I m p a c t o n i n d u s t r i a l
o r g a n i z a t i o n R C D f u n d i n g T a x p o l i c y
C o o p e r a t i o n b e t w e e n p u b l i c i n s t i t u t e s a n d i n d u s t r y Work on i n n o v a t i o n i n
p u b l i c i n s t i t u e s
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S o u r c e : C u r r e n t and P r o s p e c t i v e I s s u e s i n S c i e n c e and Technology P o l i c i e s (1980)
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INDUSTRIAL DEVELOPMENT AT THE GLOBAL LEVEL:
TRENDS, OBJECTIVES, AND STRUCTURAL CHANGES
I n n o v a t i o n a n d Long-term C y c l e s i n I n d u s t r y
T h e r e i s n o d o u b t t h a t i n t h e c o u r s e o f h i s t o r y , i n d u s t r i a l g r o w t h h a s e x p e r i e n c e d a number o f u p s w i n g s a n d downswings. The u n d e r l y i n g mechanism o f t h i s c y c l i c a l g r o w t h i s a f f e c t e d b y t h e r e l a t i o n b e t w e e n t h e c a p i t a l g o o d s and consumer good i n d u s t r i e s . R e c e n t l y Graham a n d S e n g e ( 1 9 8 0 ) i n v e s t i g a t e d t h i s a s s u m p t i o n , u s i n g a s y s t e m s d y n a m i c s a p p r o a c h .
L o o k i n g a t w o r l d i n d u s t r i a l p r o d u c t i o n f r o m 1850 t o 1 9 7 9 , w e see t h a t g r o w t h r a t e s w e r e r a t h e r u n s t a b l e d u r i n g t h i s p e r i o d . U s i n g a n e x p o n e n t i a l f u n c t i o n t o d e s c r i b e l o n g - t e r m t r e n d s , o n e o b t a i n s a p a t h o f i n d u s t r i a l g r o w t h m e a s u r e d i n d e v i a t i o n s f r o m t h e l o n g - t e r m a v e r a g e (see F i g u r e 3 ) . Here w e see t h e m a j o r downswings a n d u p s w i n g s i n i n d u s t r i a l p r o d u c t i o n , among them t h e u n p r e c e d e n t e d downswing a t t h e e n d o f t h e 1 9 2 0 s .
Long-term c y c l e s h a v e b e e n much d i s c u s s e d i n t h e l i t e r a t u r e s i n c e K o n d r a t i e f f . Some y e a r s a g o G e r h a r d Mensch d e s c r i b e d
t h e s e " l o n g waves" i n terms o f c l u s t e r s o f i n n o v a t i o n s , u s i n g t h e f r e q u e n c y d i s t r i b u t i o n o f m a j o r t e c h n o l o g i c a l c h a n g e s o v e r t i m e ( 1 9 7 5 ) .
F i g u r e 4 shows a n i n n o v a t i o n i n d e x f o r 182 i n n o v a t i o n s . I n e a c h case, t h e e v a l u a t i o n f u n c t i o n i s a d j u s t e d t o t h e d a t e o f i n t r o d u c t i o n i n t o t h e m a r k e t . Thus t h e c u r v e d o e s n o t show t h e d i f f u s i o n p r o c e s s ; d i f f u s i o n i s s e e n i n t h e i n d u s t r i a l p r o d u c t i o n c u r v e .
I n t h e p a s t 200 y e a r s , s e v e r a l m a j o r t e c h n i c a l r e v o l u t i o n s h a v e s i g n i f i c a n t l y a f f e c t e d i n d u s t r i a l a c t i v i t i e s . D e s p i t e
YEAR
Figure 3. Industrial production logarithum (World 1850-1979).
Figure 4. Innovation index based on 182 innovations (1850-1979).
differences in their technical character, they have two main features in common:
1. Each of them was caused by a bottleneck in the production system. The railroad, for example, became necessary during the industrial revolutions because of the enormous demand for transporting coal and cotton.
Each of them appeared in one area of the production system and then passed through a chain or network, step by step affecting the whole production system, and later (Figure 5) lifestyles and consumer pat- terns. For example, the spinning machine led to the mechanization of weaving, and later to the improve- ment of bleaching, textile printing, and dyeing.
The steam engine proved to be the appropriate power source for these processes. Machinery soon developed to the point where machines could be produced with machines. As the demand for iron to produce machinery increased, more coal was needed to produce the iron, and so forth.
Tables 1 1 and 1 give comprehensive overviews of past industrial growth and present historical time series for industrial produc- tion, primary energy consumption, innovations, inventions, and patents. Qualitative and quantitative analyses of past cycles are necessary for developing a scenario of future industrial growth. Looking at the sequence of technical substitutions for functions of labor, one can see that present stress on the replacement of energetic and operational functions will soon be moving toward adaptive control and guidance, providing
information, and performance of complex logical functions.
There will be a major wave in industrial activity in tele- communications, computer linkages, communications, and machine systems. This could involve major changes in processes. The biotechnologies, automation equipment, telecommunications, bioindustry, and exploitation of the ocean are likely to
be the growth industries of the next decades. Figure 6 shows the growth industries of the past and future in a hierarchical scheme with six levels of aggregation, the future industries being bioindustry, electronics, production of machines and equipment for production of machines and equipment, tele- communication, computers, protection of the environment, and exploitation of the ocean. (See also Business Week 50th Anniversary Issue).
There is an internal nucleus of industries where growth is accelerated: production means, machines and equipment, and machines and equipment for the production of machines and
equipment (Fajnsilber 1980). Thus one can distinguish between two classes of industries:
a industries which play a major role in all growth cycles, such as the engineering industry, and
B industries responsible for one particular upswing in long-term development, such as the chemical and
PRODUCTION OF PRODUCTION GOODS
WORKIN MACH IN
I
I- .- .-
. -.
AND INFORMATIONEQUIPMENT
PRODUCTION OF CONSUMER GOODS
F i g u r e 5 . The two p r o d u c t i o n s e c t o r s and t h e i r i n n e r f e e d b a c k s .
