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

Croatia

Sonja Radas, Ph.D.

Department for Innovation Management

Institute of Economics, Zagreb

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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

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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.

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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

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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?

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IS Collaboration Study in CroatiaEmpirical 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

IS collaboration in Croatia: Firm’s view

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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

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• 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

Empirical studies on industry-science relationship: firm’s point of view

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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)

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Research questions

• What motivates firms to collaborate?

• How intensely do firms collaborate?

• What drives the collaboraton intensity?

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• Intensity of collaboration is below average (2.71 on the scale from 1 to 5)

• Large firms collaborate more intensely

Intensity of IS Collaboration in Firms

His togram: P2

K-S d=.16888, p<.01 ; L illief ors p<.01

Ex pec ted Normal

0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0

X <= Category Boundary

0

10

20

30

40

50

60

70

No. o

f obs.

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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))

Motivation mean

Access to new technologies and processes 3.4

Using existing academic research potential instead of building their own («buy vs. build»)

3.39

Using the name of the academic institution as a proof of quality (e.g. tested at……)

3.63

Need to solve concrete problem 3.61

Fulfilling some formal requirements (regulations, standards, etc.)

2.49

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Orientation toward innovation and technology

Innovation and technological capacity

Indeks Cronbach Alpha 0.77, avrg inter-item corr.= 0.47

•Your company has a long term vision

•Innovations are considered very important in your company

•New technologies are considered very important in your company

•Your company has sufficient financial resources for research and development

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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)

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Access to technologies 0.079

Buy vs. build 0.057

Using name 0.026

Solving a concrete problem 0.173* 0.212**

Formal requirements 0.034

Liaison people in firm 0.229* 0.251**

Academics’ research unaplicable -0.026

Banks and investors 0.020

Customers like innovative products -0.005

Customers support innovation -0.021

Innovation and technological capability 0.269* 0.301**

Adj. R2=0.19, F=4.4

Adj. R2=0.21, F=15.17

Regression: dependent variable is intensity of collaboration

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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)

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Access to technologies -0.113

Buy vs. build 0.098

Using name 0.184*** 0.183***

Solving a concrete problem 0.191*** 0.195***

Formal requirements -0.071

Liaison people in firm 0.153*

Academics’ research unaplicable -0.11

Banks and investors 0.034

Customers like innovative products 0.121

Customers support innovation -0.069

Innovation and technological capability 0.242** 0.328***

Adj. R2=0.21, F=4.8

Adj. R2=0.18, F=12.4

Regression: dependent variable is satisfaction with collaboration quality

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Access to technologies -0.015

Buy vs. build 0.149** 0.134**

Using name 0.217*** 0.234***

Solving a concrete problem 0.183*** 0.188***

Formal requirements 0.012

Liaison people in firm 0.089

Academics’ research unaplicable -0.075

Banks and investors -0.029

Customers like innovative products -0.110

Customers support innovation 0.177*

Innovation and technological capability 0.280*** 0.319***

Adj. R2=0.23, F=5.4

Adj. R2=0.24, F=13.56

Regression: dependent variable is satisfaction with commercial effect of collaboration

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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

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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

IS collaboration in Croatia: Academics’ view

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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

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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 industry on academic activities

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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

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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?

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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

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Is lack of collaboration caused by lack of interest?

Overallmean

Technicalsciences

Naturalsciences

Biotechnica sciences

Biomedicine ANOVA

Are Croatianfirms interestedin collaboratingwith yourinstitution?

2,96 2,82 2,78 3,79 2,91 p=0,01

Are scientistsfrom yourinstitution interested incollaborationwith industry?

3,87 3,80 3,33 4,50 3,73 p=0,08

Answers on scale from 1 (not at all) to 5 (very much)

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What motivates scientists to collaborate with industry?

intellectual challenge

additional income

access to industry equipment,

possibility to publish collaboration results

using collaboration as source of case examples for teaching

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

intellectual challenge 3.37

additional income 4.12

access to industry equipment, 2.81

possibility to publish collaboration results

3.36

using collaboration as source of case examples for teaching

3.38

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Motivation and interest for collaboration

Coeff.

St.error

t p

Intercept 1,25 0,4 3,13 0,00

Intellectual challenge 0,18 0,08 2,26 0,03

Additional income 0,40 0,09 4,48 0,00

Access to industry equipment -0,04 0,08 -0,45 0,66

Possibility to publish collaboration results

0,02 0,08 0,19 0,84

Source of case examples for teaching

0,12 0,08 1,48 0,14

Adjusted R2 = 0,32, F=9,8; p=0,00000; N= 95

Dependent variable: interest for collaboration

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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

Overall mean

Collaboration withindustry is desirable forscientific community.

4.6st.dev.= 0.7

(N=90)

Scientists shouldactively pursuecollaboration withindustry.

4.4st.dev.= 0.7

(N=90)

On the scale from 1 (totally disagree) to 5 (totally agree)

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Collaboration: Academic freedomOverall means

Technscience

Naturalscience

Biotechscience

Biomedicine

ANOVA

World class research in your field is at the same time applicable in industry

4,04(N=90)

3.84(N=56)

4.11(N=9)

4.71(N=14)

4.18(N=11)

p=0.08

Industry-science collaboration can endanger academic freedom

1,85(N=90)

1.68(N=56)

1.89(N=9)

1.86(N=14)

2.73(N=11)

p=0.02

People who do applied research are not respected enough in your institution

3,00(N=90)

3,11(N=56)

3,78(N=9)

2,29(N=14)

2,73(N=11)

p=0.04

Collaboration with industry is the domain of people who are not active in research any more

2,12(N=90)

2,14(N=56)

1,89(N=9)

2,00(N=14)

2,36(N=11)

p=0.84

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Obstacles to collaboration• 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)

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Why industry does not collaborate?• Academics believe that firms do not ask for

collaboration because of the following:

Mean

(on the scale from 1 (toally disagree) to 5 (totally agree))

Lack of long-term vision 4.47

Lack of resources for investment in R&D

3.64

Lack of understanding how important innovations and new technologise are

3.64

Proclivity to buy a licence rather than invest in own research

4.43

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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

0 1 2 3 4 5

R a tin g s o n th e s ca le fro m 1 (to ta lly u n tru e ) to 5 (to ta lly tru e )

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

Num

ber o

f obs

erva

tions

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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

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Comparison Ability of scientists Mean p

Academics Croatian scientists are capable of satisfying even the most sophisticated requirements from Croatian industry

3.67 0.00

Industry Research institutions are well equipped to provide service 3.08

Aplicability of scientists' knowledge Mean p

Academics Companies in Croatia believe that scientists posses abstract and non-applicable knowledge

3.53 0.00

Industry Scientists in Croatia posses abstract and non-applicable knowledge

2.69

Educated employees - liaison people Mean p

Academics Companies in Croatia lack educated employees who can understand what scientists can do and who can serve as liaison between their company and research institutions

3.97 0.00

Industry Our company lacks educated employees who can understand what scientists can do and who can serve as liaison between the company and research institutions

2.18

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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?

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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

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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

Academics Industry

Initiative should come from industry

90.53% 82.63%

Initiative should come from research institutions

78.95% 61.05%

Initiative should come from government

38.95% 39.47%

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• 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

Incentives for IS collaboration

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Effectiveness of incentives: ranking

academics industry p

Tax breaks for companies for investing in own R&D. 2.0737 2.3579 0.005

Tax breaks for companies for investing in joint R&D research programes. 2.4421 1.9632 0.000

Direct investment from the state through co-financing of joint research programes would improve industry-science collaboration.

2.0421 1.679 0.001

Ranking the best option receives 3 points, the worst 1 point

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• 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

Incentives for IS collaboration

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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

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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