INNOVATION, GROWTH AND POLICY IN LOW AND MEDIUM TECH INDUSTRIES

A REVIEW OF RECENT RESEARCH

innovation.gov.au

INNOVATION, GROWTH AND POLICY IN LOW AND MEDIUM TECH INDUSTRIES

A REVIEW OF RECENT RESEARCH

DEPARTMENT OF INNOVATION, INDUSTRY, SCIENCE AND RESEARCH

© Commonwealth of Australia 2008

This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to the Commonwealth Copyright Administration, Attorney General’s Department, Robert Garran Offices, National Circuit, Canberra ACT 2600 or posted at http://www.ag.gov.au/cca

This publication is the outcome of a research project undertaken in 2007 on behalf of the Department by Professor Keith Smith, of the Australian Innovation Research Centre, University of Tasmania.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

3ExECUTIVE SUMMARYThis paper discusses and appraises recent research on so-called low-technology and medium-technology industries (LMT industries). The paper reviews a major research project conducted within the European Union’s FRAMEWORK 6 programme, called PILOT (Policy and Innovation in Low Tech). It gives an overview of the structure, content, and results of the PILOT project, and its implications for Australia.

Specifically, the paper:

Discusses definitional issues concerning the categories of high-tech, medium-tech and low-tech industries

Overviews the Australian industrial structure, showing that LMT industries are important in Australia’s patterns of output and trade

Overviews the structure, content and results of PILOT

Discusses other recent contributions to the study of these industries

Discusses policy implications for Australia.

It is widely argued that high-tech industries, usually meaning industries that spend more than 4 per cent of their turnover on R&D, are key drivers of economic growth, key sites of innovation, and key bearers of the ‘knowledge economy’. The PILOT project challenged all of these ideas.

Debate on these issues is important for Australia because its economic structure is dominated by LMT activities. Manufacturing and property/business services are the two largest sectors, with a substantial sector of social and community services (mainly health and education). All of these are low-R&D sectors. Mining is considerably larger than for most OECD economies, although it makes a more significant contribution to trade than to GDP. Manufacturing is dominated by LMT industries: food and beverages, fuels and chemicals, metal products and engineering together account for almost 70 per cent of the output of the manufacturing sector. The trade pattern is dominated by resource exports (the largest being coal), and high-tech manufactured imports. For these reasons the prospects for LMT industries are of some importance for Australia.

PILOT was structured around six ‘work packages’ (WPs). The basic architecture was that WP1 and WP2 built a theoretical and analytical framework for the whole project; WPs 3 and 4 contained empirically-based studies of core themes concerning LMT industries; WP5 discussed policy and WP6 synthesised results. The broad issues addressed by the project were:

Theory, conceptual and data issues

Innovation and knowledge creation

Linkages between actors in low-tech industries

Policy strategies for LMT industries

Low-tech industries and growth and employment in Europe.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

4 The methodology of the project consisted of three elements: critical studies of existing research literature, statistical work on the role of high- and low-tech industries in OECD growth and case studies of LMT companies. There were 43 company case studies across 11 countries and five industries: pulp and paper, textiles, food, wood products and metal fabrication. The case studies explored the following issues:

Organisation and structure of company knowledge bases

Methods of generating and using knowledge

Patterns of innovation

Interchanges and interactions with high-tech partners

Other cooperation patterns involving innovation

Markets structures and conditions, and their impacts on innovation

Organisational change over time

Workforce policies and industrial relations

Influences, if any, of public policies.

The project demonstrated the following main results:

LMT industries persist in the growth and trade structures of the advanced countries. There is no significant evidence of structural change towards high-tech manufacturing, and LMT sectors contribute roughly the same to growth as high-tech sectors.

LMT sectors innovate consistently, but do not do so on the basis of R&D results. That is, innovation is driven by incremental product change, not by application or commercialisation of R&D.

There are strong linkages between LMT industries and high-tech activities, with the LMT sectors often shaping technology developments in high-tech. Adoption of products by LMT sectors appears to be a critical determinant of whether or not high-tech sectors succeed.

LMT firms and industries exist as complex social organisations, embedded in networks. This ‘embeddedness’ gives them a major competitive advantage as it is often difficult to imitate the social organisations that create the products. This is a key reason for their survival and growth.

There is a general policy neglect of LMT industries.

The paper concludes by suggesting that the PILOT results are of some importance for Australia. First, the results imply that Australia’s current industrial structure can be competitive in the long run and is a potential basis for continued growth. But technological upgrading is an important issue, and this requires attention to the links between industry and the knowledge infrastructure. This has implications for the governance and incentive systems of the infrastructure. A stronger focus on LMT sectors would require greater attention to the specific innovation patterns and needs of these industries; there is a serious case for a deeper exploration of whether these sectors need more policy attention than they get and, if so, what form that should take.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

5Australia already appears to have a wider range of policy instruments focusing on LMT industries than any of the Member States of the EU. However there may remain scope for further policy development. One key issue is that on the conceptual level, a deeper policy analysis of LMT activities in Australia may require a discussion of the principle of sector neutrality.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

7CONTENTS

ExECUTIVE SUMMARY 3

INTRODUCTION 9

DEFINITIONS AND CONCEPTS 9

LOW AND MEDIUM TECHNOLOGY INDUSTRIES IN AUSTRALIA: 11 STATISTICAL DIMENSIONS

THE PILOT PROjECT: STRUCTURE AND APPROACH 20

THE PILOT WORK PACKAGES AND PROGRAMME 24

WIDER RESEARCH ON LOW AND MEDIUM TECHNOLOGY INDUSTRIES 32

POLICY IMPLICATIONS FOR AUSTRALIA 33

LIST OF ABREVIATIONS 36

REFERENCES 37

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

9INTRODUCTIONThis paper discusses and appraises recent research on so-called low-technology and medium-technology industries (hereafter called ‘LMT’ industries). The paper reviews a major research project conducted within the EU’s FRAMEWORK 6 programme, called PILOT (Policy and Innovation in Low-Tech), which explored the dynamics of innovation, growth and competitiveness in LMT industries. This paper overviews the structure, content and results of the EU project. PILOT was a large, complex study that ran from late 2002 to late 2005. It seems to be the case that there exists no comprehensive overview of all of the documents, reports and publications that emerged from the project. This review therefore attempted to assemble and survey everything that is available from the project – including unpublished case studies – and seeks to assess them.1 The main objective here is to focus on analysis of the research results and their implications for Australia.

The structure of this paper is as follows. First, it discusses definitional issues concerning the categories of high-tech, medium-tech and low-tech industries. Second, it turns to a discussion of the Australian industrial structure, showing that LMT industries are important in Australia’s patterns of output and trade. Third, it overviews the structure, content and results of PILOT. Fourth, it notes that the PILOT project did not occur in a vacuum – it was undertaken in the context of an increasing interest in LMT industries, and so this paper also discusses some other recent contributions to the study of these industries. Finally, the paper discusses policy implications for Australia.

DEFINITIONS AND CONCEPTSThe idea of classifying industries on the basis of technology intensity has a rather long and complex intellectual history: it draws on ideas concerning such disparate issues as the history of industrialisation, the scientific war effort of the Second World War, modern business organisation, and the scientific and technological conflicts of the Cold War.

In its most recent form, however, it rests on a statistical taxonomy of manufacturing industries developed in the mid-1980s at the OECD (OECD 1986: 58-61). The OECD discussed a range of ways in which the technology of industries might be quantified, including R&D spend, patenting frequency, and the employment of highly skilled people (especially research scientists and engineers). However these indicators are highly correlated with each other, and so ultimately it distinguished between industries in terms of R&D intensities only, with those (such as ICT or pharmaceuticals) spending more than 4 per cent of turnover on R&D being classified as high-technology, those spending between 1 per cent and 4 per cent of turnover (such as vehicles or chemicals) being classified as medium-tech and those spending less than 1 per cent (such as

1 There is a large number of unpublished papers on LMT industries; some of these are listed in Appendix A.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

10 textiles or food) as low tech. This classification has been accepted widely, both among academics and policymakers, and was used as a way of distinguishing between high-and low-tech industries, but also as a way of identifying knowledge-intensive industries.

The OECD technology intensity classification was modified significantly in the late 1990s. The OECD’s Thomas Hatzichronoglou divided the ‘medium technology’ group into medium-high and medium-low. A second change recognised that direct R&D is only one indicator of knowledge content and that attention should be paid also to R&D embodied in intermediate and capital inputs to low-tech industries (Hatzichronoglou, 1997). The classification proposed by Hatzichronoglou is based on the ratio of R&D expenditure to value added and the embedded technology in purchased goods. It has been widely adopted and is reproduced in Table 1 below.

Table 1: OECD classification of manufacturing industries by technological intensity

ISIC 3 classification

High-tech Aerospace 35.3

Computers, office machinery 30

Electronics-communications 32

Pharmaceuticals 24.4

Medium-high-tech Scientific instruments 33

Motor vehicles 34

Electrical machinery 31

Chemicals 24 - 24.4

Other transport equipment 35.2 + 4 + 5

Non-electrical machinery 29

Medium-low-tech Rubber and plastic products 25

Shipbuilding 35.1

Other manufacturing 36

Non-ferrous metals 27.2

Non-metallic mineral products 26

Fabricated metal products 28

Petroleum refining 23

Ferrous metals 27.1

Low-tech Paper, printing 21 + 22

Textile and clothing 17 + 18 + 19

Food, beverages and tobacco 15 + 16

Wood products 20

Source: Hatzichronoglou, 1997.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

11LMT INDUSTRIES IN AUSTRALIA: STATISTICAL DIMENSIONSA key aim of this paper is to discuss research on LMT industries in terms of their relevance for Australia. This section sets the stage for that discussion by providing an overview of the broad significance of LMT industries for the Australian economy.

Although it is sometimes claimed that high-tech industries are in some sense driving growth processes, the persistence of LMT industries is a striking feature of the OECD economies. In all OECD economies, the high-tech manufacturing sectors are small (invariably less than 5 per cent of total output, and often less than 3 per cent), and large proportions of output and employment derive from the LMT sector. The major structural shift in OECD economies has not been towards high-tech manufacturing industries, but towards services. There is no generally accepted technology intensity classification for services, but if we used the usual technology indicators – such as R&D, or patents, or highly qualified personnel – then large parts of the services sector also qualify as LMT.

These considerations are especially important in Australia because of its particular industrial structure. This section looks briefly at various dimensions of that structure to establish the importance of LMT industries in its output, growth, employment and trade structures.

The intention here is not to explore recent trends but to simply overview data on Australian industry structure.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

12 Table 2 outlines the main dimensions of the industrial structure, in terms of the contributions of various sectors to GDP. Australia exhibits the highly diversified structure typical of advanced economies, with Manufacturing and Property and business services as the two largest sectors, and a substantial sector of social and community services (mainly Health and Education). In general all sectors except Agriculture have been growing in absolute terms, but at different rates; the highest growth rates have been in service activities so the overall structure has shifted towards services. Mining is considerably larger than most OECD economies, although it is more significant for its contribution to trade than to GDP.

Table 2: The Australian Industrial Structure (a)

ANZSIC Division (b)

2004-05

$m %

Agriculture, forestry and fishing 25 362 3.3

Mining 35 707 4.6

Manufacturing 96 144 12.3

Electricity, gas and water supply 18 943 2.4

Construction 53 024 6.8

Wholesale trade 41 926 5.4

Retail trade 52 412 6.7

Accommodation, cafes and restaurants 18 383 2.4

Transport and storage 38 701 4.9

Communication services 23 799 3.1

Finance and insurance 58 567 7.5

Property and business services 99 153 12.7

Government administration and defence 33 521 4.3

Education 36 987 4.7

Health and community services 51 793 6.6

Cultural and recreational services 11 736 1.5

Personal and other services 15 033 1.9

Ownership of dwellings 69 424 8.9

Gross value added at basic prices 780 616 100.0

Gross domestic product 857 765

(a) Chain volume measures, reference year 2003-04. (b) Classified according to the Australian and New Zealand Standard Industrial Classification (ANZSIC), 1993 edition.

Source: Australian System of National Accounts, 2004-05 (5204.0), Table 9.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

13The structure of employment, shown in Table 3, only partially reflects output, because of significant productivity differences across industries. (The productivity differences in general reflect significant cross-industry differences in capital-labour ratios). Mining is significantly lower in terms of employment than output, while Retail trade, and Health and community services are significantly higher. But, once again, employment is not driven by high-tech activities in Australia.

Table 3: Employed persons: Industry, November 2005

ANZSIC Division (a) ’000 %

Agriculture, forestry and fishing 353.3 3.5

Mining 134.0 1.3

Manufacturing 1 076.9 10.8

Electricity, gas and water supply 87.2 0.9

Construction 854.8 8.5

Wholesale trade 429.0 4.3

Retail trade 1 513.1 15.1

Accommodation, cafes and restaurants 499.4 5.0

Transport and storage 456.9 4.6

Communication services 179.5 1.8

Finance and insurance 366.3 3.7

Property and business services 1 197.3 12.0

Government administration and defence 455.7 4.5

Education 730.8 7.3

Health and community services 1 021.3 10.2

Cultural and recreational services 273.9 2.7

Personal and other services 387.7 3.9

Total 10 017.0 100.0

(a) Classified according to the Australian and New Zealand Standard Industrial Classification (ANZSIC), 1993 edition.

Source: Labour Force, Australia, Detailed, Quarterly Feb 2006 (6291.0.55.003).

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

14 Table 4 shows the structure and growth trends of the Manufacturing sector in more detail. Manufacturing grew by about 6 per cent between 2000-1 and 2004-5. The key point about this sector in Australia is that it is dominated by low and medium-low technology activities (according to OECD classifications). Food and beverages, fuels and chemicals, metal products and engineering together account for almost 70 per cent of the output of the sector.

Table 4: Manufacturing Industry (a), Gross value added (b)

ANZSIC Subdivision

2000-01 2004-05 % change from

2000-01 to 2004-05$m % $m %

Food, beverage and tobacco manufacturing 18 821 20.6 19 076 19.8 1.4

Textile, clothing, footwear and leather manufacturing 4 320 4.7 2 621 2.7 -39.3

Wood and paper product manufacturing 6 543 7.2 6 924 7.2 5.8

Printing, publishing and recorded media 9 613 10.5 10 095 10.5 5.0

Petroleum, coal, chemical and associated product manufacturing 12 521 13.7 12 817 13.3 2.4

Non-metallic mineral product manufacturing 3 863 4.3 4 852 5.1 25.6

Metal product manufacturing 16 025 17.6 17 483 18.2 9.1

Machinery and equipment manufacturing 16 002 17.5 18 185 18.9 13.6

Other manufacturing 3 567 3.9 4 092 4.3 14.7

Total manufacturing 91 275 100.0 96 144 100.0 5.8

Total manufacturing as a proportion of GDP 12.1 11.2

(a) Classified according to the Australian and New Zealand Standard Industrial Classification (ANZSIC), 1993 edition. (b) Chain volume measures, reference year is 2003-04.

Source: Australian System of National Accounts, 2004-05 (5204.0).

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

15The same can be said of Australia’s services sector. Here there is no specific metric of technology intensity, but we do nevertheless have R&D data that permits a similar assessment. With the exception of the higher education sector, none of the major activities that make up the services sector are significant R&D performers. Retail and Wholesale trade, Finance and insurance, Transport and storage and Property and business services, which together comprise about 60 per cent of the output of the sector, are not performers of R&D on any noticeable level; on the other hand, R&D across the OECD remains strongly focused on manufacturing (OECD 2006).

Table 5: Service Industries (a), Gross value added (b)

ANZSIC Subdivision

2000-01 2004-05 Average annual

growth from 2000-01 to

2004-05 %$m % $m %

Wholesale trade 36 073 8.6 41 926 8.7 16.2

Retail trade 43 463 10.4 52 412 10.9 20.6

Accommodation, cafes and restaurants 16 063 3.8 18 383 3.8 14.4

Transport and storage 31 798 7.6 38 701 8.1 21.7

Communication services 20 172 4.8 23 799 4.9 18.0

Finance and insurance services 52 229 12.5 58 567 12.2 12.1

Property and business services 87 144 20.8 99 153 20.6 13.8

Government administration and defence 29 740 7.1 33 521 6.9 12.7

Education 34 919 8.3 36 987 7.7 5.9

Health and community services 43 474 10.4 51 793 10.7 19.1

Cultural and recreational services 9 898 2.4 11 736 2.4 18.6

Personal and other services 13 778 3.3 15 033 3.1 9.1

Total (c) 418 751 100.0 482 011 100.0

(a) Classified according to the Australian and New Zealand Standard Industrial Classification (ANZSIC), 1993 edition. Note that the table does not include ANZSIC classifications D (Electricity, gas and water) or E (Construction). (b) Chain volume measures, reference year 2003-04. (c) Excludes ownership of dwellings.

Source: Australian System of National Accounts, 2004-05 (5204.0).

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

16 The strong LMT orientation of Australia is even more sharply present in the trade structure, and in particular the balance of trade. Nearly 70 per cent of Australia’s exports come from three LMT groups: agricultural and food products, fuels and non-fuel minerals. A further 20 per cent of earnings come from two largely LMT manufacturing industries – machinery and general manufactures. Australia’s commodity imports are heavily biased towards Machinery and transport equipment, which make up 45 per cent of imports. Australia’s balance of payments position has been heavily influence by a very favourable shift in the terms of trade over the past 10 years as the prices of raw materials have risen while the cost of manufactured goods have fallen; indeed, the trade structure has actually been very favourable to Australian consumption.

Table 6: International Merchandise Trade 2005-06

Selected major merchandise commodity groups

Exports Imports

$m % $m %

Food and live animals 19 227 12.7 5 920 3.5

Beverages and tobacco 2 984 2.0 1 127 0.7

Crude materials, inedible, except fuels 33 990 22.4 1 974 1.2

Mineral fuels, lubricants and related materials 38 882 25.6 21 600 12.9

Animal and vegetable oils, fats and waxes 320 0.2 414 0.2

Chemicals and related products, n.e.s. 6 605 4.4 18 474 11.0

Manufactured goods classified chiefly by material 14 898 9.8 18 439 11.0

Machinery and transport equipment 13 368 8.8 72 533 43.3

Miscellaneous manufactured articles 4 577 3.0 22 145 13.2

Subtotal, selected commodity groups 134 851 88.8 162 626 97.0

All other commodities 16 941 11.2 4 977 3.0

Total commodity exports/imports 151 792 100.0 167 603 100.0

Source: Aggregated from data published in International Trade in Goods and Services, Australia (5368.0)

The specifics of this trade pattern can be seen more clearly in Table 7 and 8. In general, commodity trade is spread over a very wide range of products, and relatively few products make up more than a few per cent of either imports or exports. The notable exceptions are Iron ore and Coal, which together make up approximately one-quarter of Australia’s commodity exports.

Most imported commodities are bought in relatively small quantities, so nearly 60 per cent of imports consist of commodities that individually make up less than 1 per cent of imports. Only 12 commodity groups have more than 1 per cent each of imports. The largest of these are Crude and Refined oil: 12.4 per cent of imports. The high-tech product groups (pharmaceuticals, computing, Telecommunications equipment, and aircraft) taken together make up 14.5 per cent of commodity imports.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

17Table 7: Merchandise Exports of Major Commodities

Commodity group (a)

2005-06

$m %

Meat of bovine animals 4 541 3.0

Wheat 3 213 2.1

Wool and other animal hair 2 258 1.5

Iron ore and concentrates 12 511 8.2

Aluminium ores and concentrates 5 294 3.5

Coal, not agglomerated 24 350 16.1

Crude petroleum oils 6 004 3.9

Refined petroleum oils 3 096 2.1

Natural gas 4 347 2.8

Aluminium 5 206 3.4

Passenger motor vehicles 3 193 2.1

Gold, non-monetary 7 274 4.8

All other commodities 70 505 46.5

Total 151 792 100.0

(a) Based on the UN Standard International Trade Classification, Revision 3 (SITC Rev3), 3-digit code.

Source: Aggregated from data published in International Trade in Goods and Services, Australia (5368.0)).

Table 8: Merchandise Imports of Major Commodities

Commodity group (a)

2005-06

$m %

Crude petroleum oils 12 464 7.4

Refined petroleum oils 8 322 5.0

Medicaments 5 942 3.5

Paper and paperboard 2 043 1.2

Automatic data processing machines 6 081 3.6

Parts and accessories of office machines 2 215 1.3

Telecommunications equipment 5 838 3.5

Passenger motor vehicles 11 998 7.2

Motor vehicles for the transport of goods 4 353 2.6

Parts and accessories of motor vehicles 2 261 1.4

Aircraft and associated equipment 4 293 2.6

Gold, non-monetary 4 804 2.9

All other commodities 96 989 57.8

Total 167 603 100.0

(a) Based on the UN Standard International Trade Classification, Revision 3 (SITC Rev3), 3-digit code.

Source: Aggregated from data published in International Trade in Goods and Services, Australia (5368.0).

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

18 Table 9 looks at the geographic structure of this trade pattern, in terms of trade balances. Here the basic point is that Australia runs consistent deficits in the overall merchandise balance of trade (which are offset by persistent financial inflows). With respect to specific countries or regions, Australia runs surpluses with three countries: India, japan and Korea, in each case resulting from major exports of raw materials and coal. Australia runs substantial deficits with three areas: with China, the United States of America (USA) and the European Union (EU). The deficit with the EU is the most substantial, being somewhat larger than the combined deficits with China and the USA. Although Australian exports to the EU have grown sharply the deficit remains large. Rapidly growing exports to China have been offset by imports that have grown almost equally in volume, while trade with the USA has remained stable on both import and export sides.

Table 9: Merchandise Exports and Imports, by country and country group (a)

Exports Imports Balance of trade (b)

2004-05$m

2005-06$m

2004-05 $m

2005-06$m

2004-05 $m

2005-06$m

Selected countries

China (c) 13 003 17 889 19 812 23 206 -6 809 -5 317

japan 24 955 30 982 17 161 17 337 7 794 13 645

Korea, Republic of (South) 9 720 11 691 5 006 6 491 4 714 5 200

India 6 055 7 333 1 220 1 240 4 835 6 093

USA 9 462 9 781 21 270 22 776 -11 808 -12 995

Country groups

APEC 93 027 109 280 103 716 120 166 -10 689 -10 885

Developing countries 62 362 75 477 63 746 77 339 -1 384 -1 862

Least developed countries 1 487 1 537 223 341 1 264 1 197

European Union 13 816 18 541 35 086 36 267 -21 270 -17 725

OECD 70 182 82 818 88 896 93 817 -18 714 -10 999

a) Classified according to the Standard Australian Classification of Countries (SACC). (b) A negative sign indicates that merchandise imports exceed merchandise exports. (c) Excluding SARs and Taiwan Province.

Source: Aggregated from data published in International trade in Goods and Services, Australia (5368.0).

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

19What emerges from these figures is not uncommon in the international division of labour: Australia is a country exporting raw materials and importing manufactures. What is odd is that economists have often regarded this pattern as typical of less developed countries. Indeed, economists have frequently argued that such structures are incompatible with high and rising levels of income. The basic argument during the 1960s and 1970s (still to be found fairly widely today) was that technological change and productivity growth were confined to manufactures (and to the high-tech end of manufactures at that). It followed that the basic problem of development was one of shifting away from this pattern by means of balanced or unbalanced growth strategies, import-substituting industrialisation paths or some related way of escaping the raw material export trap.

Australia is clearly a major counter-example to this kind of view of development. It is important to note that it is not alone. First, a number of OECD economies, including the Nordic countries, the Netherlands, Canada and possibly New Zealand, share some significant features of this structure. These countries are small, open economies with substantial sectors based on natural resources or LMT industries. Second, within the OECD, the EU is characterised by significantly smaller high-tech sectors than either japan or the USA. Obviously the EU is not resource-based in the Australian or Norwegian sense, yet it is not a high-tech economy either; it is an LMT economy. Even so, it manages to sustain very strong trade positions, high productivity economies (including the two highest in the world measured by output per worker hour) and a good growth record. Finally, the BRICS economies (Brazil, Russia, India, China and South Africa) are all exhibiting strong growth, in three of these cases on the basis of major resource sectors.

The question raised by this is whether or not LMT sectors can form the basis of sustained innovation, productivity growth and development. The next section turns to an overview of a major project that has looked at these issues.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

20 THE PILOT PROjECT: STRUCTURE AND APPROACHThe PILOT project ran for almost three years from December 2002 to November 2005 and a final report was presented in january 2006 (Bender 2006). Eleven research teams in nine countries were collaborating partners in the project, which was coordinated through the University of Dortmund, Germany. The project was organised as five core work packages (WPs) running in parallel throughout. A sixth work-package synthesised results and conclusions of the project and discussed policy implications.

The PILOT Work Package structure consisted of three specific studies based on a case-study methodology (WPs 3, 4 and 5), and three ‘horizontal’ studies looking at conceptual issues, economic growth effects and summary issues. The basic structure can be depicted as follows:

Figure 1: Structure of the PILOT project

WP1: Theory, Conceptual and Data IssuesContribution to conceptual and theoretical development on knowledge formation and

technological activities

WP3:Innovation and Knowledge CreationAnalysis of low-tech knowledge bases and their role in innovation strategies

WP4:Linkages Between Actors in Low-Tech IndustriesLow-tech companies from a network and value-chain perspective

WP5:Policy Impacts and Policy StrategiesSupport policies, and supporting institutions and organizations

WP2: Low-Tech Industries and the Growth and Employment Performance of EuropeContribution to conceptual and empirical understanding of the relationship between

innovation, growth and employment

WP6: Synthesis and Policy ImplicationsOverall conclusions and policy implications

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

21WP1 and WP2 built a theoretical and analytical framework for the whole project, WPs 3 and 4 contained empirically based studies of core themes concerning LMT industries and WP5 discussed policy. In WP1, conceptual and macro questions concerning LMT industries were explored, including work on taxonomic issues and the nature of statistical concepts related to LMT industries. WP2 explored empirical growth patterns in the OECD and looked at the extent of structural change and established the persistence of LMT industries. WP 3, 4, and 5 were the empirical pillars of PILOT. WP3 consisted of a Europe-wide set of case studies of firms in LMT industries focusing on knowledge generation and use. WP4 also focused on firms but with a focus on inter-firm and inter-organisational linkages through networks and value chains. WP5 looked at policy at regional, national and EU levels.

Each work-package was co-ordinated by a PILOT partner and most involved the entire team. The empirical core of the project was a complex array of studies of firms and industries across a set of LMT industries. The basic methodologies were statistical in the case of the growth studies, and case studies in the firm and industry studies. The growth studies rested on use of the OECD’s STAN (Structural analysis) and ANBERD (Analytical business expenditure on R&D) databases over the period 1980-2000. The case studies were carried out in all participating countries. The study identified 14 case studies covering 43 companies. The case studies primarily focused on firms in the fabricated metal products sectors, although other sectors were also covered.

The overall set of sector studies included:

Textiles, apparel and leather

Fabricated metal products

Metal production

Food, beverages and tobacco

Wood products and furniture

Paper and printing.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

22 The basic structure of the case study coverage is as follows:

Table 10: The PILOT case studies

Industrial sectors

Number of employees Paper & pulp Textile Food

Wood & furniture Metal

1-50 – 1 1 1 5

51-100 3 1 2 2 6

101-250 1 – 1 – 6

251-500 – 1 1 1 5

> 500 1 – 1 – 3

Sum (N=43) 5 3 6 4 25

Within the industry categories, which remain rather aggregated, a wide range of specific product groups were studied. These ranged from food products such as pasta, to bathroom fittings and propellers for ships. The full breakdown by research team and products is in Table 11.

The basic research method consisted of structured interviews covering the following topics:

Organisation and structure of company knowledge bases

Methods of generating and using knowledge

Patterns of innovation

Interchanges and interactions with high-tech partners

Other cooperation patterns involving innovation

Markets structures and conditions, and their impacts on innovation

Organisational change over time

Workforce policies / Industrial relations

Influences, if any, of public policies.

Usually about six interviews were conducted with firm members across different positions and functions. This was complemented by site visits and the use of publicly available material on the companies.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

23Table 11: PILOT Case studies: products covered

Partner Sector Products

AIER Textiles, apparel & leather Industrial textiles

Fabricated metal products Pull-out & hinge systems for furniture

Fabricated metal products Rails

Fabricated metal products Railway points

CAULU.SSI.PEM

Food, beverages & tobacco Frozen fruit and vegetable

Food, beverages & tobacco Pasta

Fabricated metal products Parts for vehicles

Fabricated metal products Cooling systems

DCU.BS Wood products & furniture Furniture

Wood products & furniture Furniture

Fabricated metal products Precision components

Fabricated metal products Flow-pumping systems

FILOV Fabricated metal products Car-wheels (aluminium)

Fabricated metal products Sintered mechanical components

Textiles, apparel & leather Medium and high-end clothing (design)

Textiles, apparel & leather Clothing (production)

ISFE Paper & printing Very fine paper

Paper & printing Standard mass paper

Fabricated metal products Industrial lifting equipment

Fabricated metal products Valves

RIT.IEM Fabricated metal products Hand tools

Fabricated metal products Bathroom fittings

Wood products & furniture ‘High-end’ office furniture

Paper & printing Standard paper

STEP Fabricated metal products Sockets, plugs and switches

Fabricated metal products Hydraulic and mechanical equipment

Food, beverage & tobacco Fish products

UDTM.ESS.TS

Wood products & furniture Swivel chairs

Fabricated metal products Metal tubes

Metal production Steel profiles

Fabricated metal products Electrical heating elements

UjAG.MAN Paper & printing Printing house

Food, beverages & tobacco Meet products

Fabricated metal products Mounts & links

Fabricated metal products Steel platform gratings, stair treads

UOVE.FUN Fabricated metal products Railway parts

Fabricated metal products Aluminium ingots

Food, beverages & tobacco Dairy products

Food, beverages & tobacco Dairy products

VTT.GST Fabricated metal products Ship propellers

Fabricated metal products Metal parts for the building industry

Paper & printing Packaging material

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

24 THE PILOT WORK PACKAGES AND PROGRAMMEThis section looks at the six work packages, and discusses the main contributions and results. Each discussion concludes with a brief ‘Appraisal’. The discussion here is based on the outputs of the work packages. Each of the work packages produced four broad sets of outputs:

Working papers that were discussed in the project’s working meetings

Company case studies (43 in total)

Papers that were published in article or book form

Brief summaries published in a series of news reviews from the project.

The coordinators of each of the work packages also produced a summary report. The project also produced an initial review of the ‘state of the art’ in LMT studies (Low Tech Industries and the Knowledge Economy: State of the Art and Research Challenges). There was a large-scale final report and a final summary, both of which were presented to the European Commission (a version of the final summary was published in the journal Prometheus). The project also produced a book: Hartmut Hirsch-Kreinsen, David jacobson and Staffan Laestadius (eds) Low Tech Innovation in the Knowledge Economy (Frankfurt: Peter Lang), 2005.

State of the Art Review

PILOT opened with an attempt to review the literature and to assess the ‘state of the art’ in industry studies of technology and innovation. The key point of the review was its emphasis on the long-term historical and intellectual basis for the current focus on high-tech. It argued that the interest in science-based industrial and technological development – which is where the high-tech discourse emerged – originated in the intersection of four sets of ideas:

the Vannevar Bush model of the interactions between science and growth

ideas concerning the long-run development of corporate capitalism

the Cold War

perceptions of Triadic competition (that is, competition between japan, the USA and Europe).

Vannevar Bush was President Franklin Roosevelt’s chief scientific advisor during World War II and played an important role in the management both of the Manhattan Project and the wider US scientific war effort. As the war drew to a close, he was asked by President Roosevelt to prepare a report on the funding and organisation of civil science in the USA in the post-war period. Bush strongly pushed the idea of a science-based linear model of innovation in which science was the key factor in growth.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

25‘Basic research leads to new knowledge. It provides scientific capital. It creates the fund from which the practical applications of knowledge must be drawn. New products and processes do not appear full-grown. They are founded on new principles and new conceptions, which in turn are painstakingly developed by research in the purest realms of science ... A nation which depends upon others for its new basic scientific knowledge will be slow in its industrial progress and weak in its competitive position in world trade, regardless of its mechanical skill.’ (Bush 1960: 19)

The argument here was that science policy ought to be seen in the context of firm competitiveness, and that competitiveness rested ultimately on scientific advance and inputs. This intersected with views about the rise of large corporations in the USA, which often involved the internalisation of large-scale R&D functions. Schumpeter argued that, as a result, large oligopolistic firms were drivers of technological change and that innovation was shaped by the increasing science orientation of large firms in the chemical, petroleum, vehicles and electronics sectors. This led to a substantial literature in the 1950s focusing on ‘managerial capitalism’ – a frequent argument being that large firms characterised by separation of ownership and control were the bearers of modern technological development. This trend culminated in the work of Alfred Chandler who not only focused on the managerial revolution in large-scale business, but argued that an integration of high-tech and big business was the main element of global economic transformation (see Strategy and Stucture, 1962; The Visible Hand, 1977; Scale and Scope, 1990; and excellent recent overview of his ideas is Chandler 2006).

At the same time, the Cold War became increasingly focused on science and technology issues after the first Soviet satellite launches in 1957. This fed through into both science policy and education policy, and led to substantial increases in Pentagon funding for science and technology.

Finally, the rise of first japan and then other Asian economies pushed attention towards a number of semiconductor-related technologies, and more generally towards electronics as a major growth sector.

The argument of the report was that these broad views coalesced into the concept of high-technology which emerged into wide use in the 1980s and was codified by the OECD statistical classification described above. The paper noted the connection between these ideas and the notion that the advanced countries were undergoing a dual transition, with low-tech manufactures shifting to the less developed countries and the domestic economy shifting towards services. Against this background, the review developed a critique of the OECD taxonomy, an overview of a number of industry studies and a discussion of concepts of knowledge (clearly central to any claim that high-tech is equivalent to knowledge intensity). The review came to the strong conclusion that ‘...at least one result seems beyond dispute: it is clear that even in industries that have relatively low or even no R&D, innovation can and does take place. No studies have yet provided evidence of a deep understanding of the nature of innovation in low tech industries’ (Hirsch-Kreinsen et al, 2005:25).

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

26 Appraisal: This review succeeded in showing that the high-tech issue was not simply a matter of a particular OECD classification, but rather that the OECD classification rested on a complex background of research assumptions, political and science policy notions, statistical categories and business history. There was no single driving force behind high-tech growth ideologies – they have emerged out of an amalgam of ideas from disparate sources. The overview paper of PILOT made some real progress in sorting out these issues, but is certainly not a definitive history of the conceptual background. However it did enough to show that the high-tech model is challengeable in historical terms, that LMT industries are innovative and appear to be sustainable, and that there is a major unstudied problem in all this.

Theory, Conceptual and Data Issues

PILOT work on data focused largely on a critique of R&D-based concepts of technology intensity, and an exploration of alternative conceptual and statistical frameworks for classifying industries. Three sets of papers emerged: background papers produced ahead of the project itself, papers on definitional and taxonomic issues, and papers on innovation measurement.

An important background paper (published as Carroll, Pol and Robertson 2002) made the insightful point that there are a number of potential indicators of knowledge intensity, including employment of highly qualified scientists and engineers, capital intensity and design intensity, and that these measures of knowledge intensity do not correlate well with each other. That is, firms and industries that are high-tech on one measure may be low-tech on another, and the measures themselves are unstable.

Other papers discussed basic definitional issues concerning R&D and the relevance of using these single knowledge indicators as a measure of technology intensity. Two papers by Laestadius looked at the general problems of constructing classifications and taxonomies of firms and industries as the potential basis of new statistical exercises. Hauknes argued that a new approach to innovation indicators was required because innovation was taking new forms, and that the OECD/EU approach represented by the Oslo Manual was outdated. Hauknes hypothesised that what matters in indicator development is grasping the elements of firm behaviour in innovation, which consisted largely in the development of competences. However, he gave no indication of how this might be done. Smith looked at innovation indicators, arguing that the Oslo Manual approach was a reasonable one across LMT industries and that the significant quantity of published innovation survey data was making a new approach to LMT industries possible (Smith 2005).

Appraisal: Two things seem to have become clear from this work. First, it is relatively straightforward to produce a strong critique of the conceptualisation and use of R&D data. The main problems with R&D data are weaknesses in definition and weaknesses in terms of how the main R&D-based indicators should be interpreted. The main problem in interpretation is that R&D intensity indicators (such as the R&D/GDP ratio) are affected not simply by R&D performance but also by the industrial structure: a

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

27country can have high relative R&D intensities across all industries but a low overall R&D/GDP ratio simply because it has most of its output coming from low R&D intensity industries. The second point from this work is that however weak our current indicators, it is another thing entirely to produce a set of definitions and classifications that might have both theoretical coherence and practical usefulness. It is fair to say that although much ground-clearing work was done, PILOT made no real advances in producing any new approach to technology intensity classification across industries. It might be argued that a major weakness in PILOT was its failure to take enough account of the new generation of innovation surveys, which had low-tech industries as an explicit part of their design concepts. How these surveys might be improved for industry analysis remains a serious policy challenge.

Innovation and Knowledge Creation

PILOT was established in opposition to the idea that innovation should be conceptualised in terms of a process of research followed by the commercialisation of research results. This immediately led to a major research question: if the research-commercialisation sequence is misleading, how then does innovation happen in LMT industries? Case studies focused on methods and processes of innovation across the companies with a view to assessing underlying models of innovation.

The case study work decisively rejected R&D-based models of innovation that presume an initial process of scientific or technological discovery that initiates an innovation. No case study identified any innovation which was sparked by a research process, let alone innovations that were directly generated by recent scientific findings and knowledge. However this does not mean that either R&D or more general scientific results were unimportant to these industries, but that the relationship needs to be understood differently.

In terms of knowledge, the conclusion that emerged from the case studies was that rather than creating new knowledge (via R&D, for example) the problem for LMT firms was one of configuring largely pre-existing knowledge into new forms that matched new product concepts.

‘Innovation in the LMT firms and sectors that we have examined is to a great extent the result of the transformation and reconfiguration of well-known internal and external knowledge and components and technologies developed elsewhere.’ (Hirsch-Kreinsen et. al. 2006: 11).

The problem for firms was to develop the capabilities to access, adapt, integrate, and deploy knowledges from external sources. Links with universities and research institutes played an important role in this.

The ‘configuration process’ was argued to have three broad dimensions:

Cognitive

Organisational

Design

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

28 The cognitive knowledge dimension involved configuring knowledge that was distributed over many agents or sites into firm-level knowledge bases. This was essentially a process of monitoring, identifying and accessing knowledge that could be incorporated into the knowledge base of the firm. The organisational dimension involved search across relevant organisations that might contribute to problem solving within the firm. The design activity related to configuring functional features of a product in new ways that might enhance existing functionality or create new modes of use. Although none of the case studies found that R&D played a significant role in generating innovations, nevertheless it was argued that many firms used science results in their ‘reconfigured’ knowledge bases.

These broad conclusions led to an argument that it was necessary to conceptualise innovation in LMT firms in terms not of ‘linear’ approaches but rather with ideas from resource-based theories of the firm. Here the focus is on how firms undertake investment programs that build tangible and intangible assets and capabilities that provide competitive advantages over time. Successful LMT firms tended to have quite focused and concentrated strategic direction: ‘most firms … are characterised by the concentration of strategic knowledge in the hands of a rather small group of managers and technical staff.’ (Hirsch-Kreinsen et. al. 2006: 22)

From the perspective of the resource-based theory of the firm, an important element of innovativeness is skills and hence personnel management. A frequent theme within the case studies was the importance of workplace skills, and the persistent need to stimulate knowledge accumulation on shop floor, via internal training, and on-the-job learning by doing, and learning by using. The case studies emphasised repeatedly that training was a key element in developing an ensemble of intra-firm capabilities. Against this background, LMT firms exhibited a marked contrast with Taylorist patterns of work organisation. Access to personnel was a key element of performance, and so LMT firms performed well where there were active external labour markets, which facilitated recruitment of key personnel.

Innovation in LMT firms often took the form of incremental product upgrading but was not exclusively focused on product change. Firms frequently undertook process change; however, this was often linked to qualitative improvements in products. In many cases, technological upgrading was a process that had been underway over long periods, resulting in cumulative changes in product performance that may be quite striking over the long run.

Appraisal: A reading of the case studies suggests an important point about innovation processes: that there is wide variation in company organisation, and wide variation also in qualifications and relevant skill patterns in workforces. It is therefore difficult to make generalisations across these activities. There is no such thing as a ‘typical’ LMT firm or industry, and so both analysts and policymakers face the difficult challenge of forming quite differentiated approaches to these industries. Nevertheless, these studies succeeded in showing that LMT industries are knowledge developers as well as knowledge users, and hence that any concept of the ‘knowledge economy’ must

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

29have a strong focus on these sectors if it is to be credible. The idea that the ‘knowledge economy’ or the ‘information society’ are somehow tied up with high-tech activities simply does not survive the research of the PILOT project. The case studies emphasised the need for conceptual clarity about the role of R&D in innovation: it is in the main not a process in which acts of discovery initiate innovation programmes, but rather a problem-solving activity within on-going innovation work. A key issue, then, is how this is organised: what are the modes of contact and knowledge-flow between LMT firms and publicly supported universities, research institutes or other knowledge-creating agencies? This question was not thoroughly addressed within the case studies, and therefore leaves an important gap. This will be discussed further below.

Linkages Between Actors in Low-Tech Industries

Within this theme PILOT looked at two broad issues: first, the extent to which LMT firms depended on local networks; second, the extent of interactions between LMT firms and high-tech industries.

The case studies showed extensive inter-firm collaboration in low-tech industries and firms. All of the firms that were studied were engaged in inter-firm collaboration that involved transfers of knowledge around innovation processes. Many of the important networks of firms were local in character, and many firms depended on local labour markets, training facilities and other forms of support. However, not all LMT firms are embedded in local networks: many are global in outlook and participate in global networks. The internationalisation of LMT firms appears to be a neglected element in their operations at the present time. Some of the firms studied in PILOT were transnational in character and many had cross-border collaborative links. Basri (2006) shows examples of this process for Australia in activities such as confectionary production.

A second issue was backward linkages from LMT firms to high-tech firms and industries. The case studies suggested a wide range of such linkages. These generally did not involve the purchase of ‘general purpose’ capital equipment or intermediate inputs such as computers or electronic components. Rather, they involved the design and development of quite specific technologies which were designed or significantly adapted for the user industries. These frequently involved forms of numerically controlled machine tools, or monitoring or instrumentation equipment, or the use of specific computing technologies and software for design purposes.

Appraisal: These results are significant because they suggest LMT industries have quite large impacts on high-tech innovation and development. It is sometimes argued that although high-tech activities are rather small they are important because they ‘drive’ innovation in other sectors. The causal linkages in this have rarely been explored; it is often more a matter of assertion than a real research-based conclusion. PILOT suggested that things were often going the other way: that the needs and demands from LMT sectors are powerful shaping devices in determining both the trajectories of high-tech activities and the particular forms they take in some economies.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

30 Policy Impacts and Policy Strategies

PILOT looked at the role of LMT industries in the formation and implementation of R&D and innovation policies at both national and local levels across the Member States of the EU. In part this involved the case study work, with firms being asked about participation on policy programs or projects. However, it also involved an examination of regional and national policy structures, as well as EU-level databases on innovation policy (specifically the TrendChart initiative which maps policy initiatives across the EU Member States).

This effort revealed the (perhaps unsurprising) conclusion that there is no strong awareness of LMT issues in either EU or Member State policy-making. PILOT concluded that ‘there are great innovation policy shortcomings as far as the specific problem situations of LMT companies are concerned’. One of the key dimensions of EU policy (specifically in the FRAMEWORK programmes) has been a strong emphasis on ICT, biotechnology and nanotechnology at the expense of technologies or scientific fields that may be more relevant to LMT industries. PILOT noted that this set of priorities is replicated across all of the EU Member States that were studied - a point that is confirmed by the detailed R&D policy overview available from the EU’s ERAWATCH website.2 PILOT made the important point that policies that are apparently industry neutral, such as fiscal incentives to R&D, are in fact policies that by default target specific industries that are R&D intensive. A major problem in policy design for the future, however, is that of variation across industries (in terms of innovation methods and inputs) which would require a more complex design process for policy support.

A specific policy proposal from PILOT concerned the need for greater attention to training as a support for LMT firms. The firms interviewed in the case studies were heavily dependent on workplace skills, but also dependent on the external development of skills and relevant education. In many cases local or regional governments were attentive to these educational requirements, particularly if firms were clustered. But since skills embedded in local areas were so central to competitiveness, it was suggested that this was potentially an area for policy support.

Appraisal: The policy section of PILOT is in many ways the thinnest of the research work packages, mainly because it was conceived as a study of policy practice and there is simply not much to be found in terms of LMT-oriented policies in Europe. This leaves open major questions in terms of the rationale, scope and design principles of policies that might support these industries. Most of the PILOT studies indicate that policy frameworks across the EU combine notions of policy neutrality with R&D policies oriented towards the underlying knowledge bases of high-tech industries (sometimes linked with commercialisation programmes). Neither of these approaches address the knowledge dynamics of the industries studied in PILOT, nor do they take into account the interactions between LMT and high-tech that were stressed by PILOT. These serious policy problems look somewhat different in the Australian context - this will be discussed in the concluding section.

2 http://cordis.europa.eu/erawatch

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

31Low-Tech Industries and the Growth and Employment Performance of Europe

The study here explored the general argument that economic growth is characterized by the creation of new industries and the replacement of old industries. This approach implies that low-tech industries have declining shares of output for two reasons: their growth is lower (or they are declining absolutely) and they are relocating to low-wage economies (that is, they exhibit trade-driven ‘hollowing out’). If true, these claims would imply that shares of high-tech output are rising significantly in growing economies, while low-tech shares are falling significantly, and that countries with larger high-tech sectors will exhibit higher growth rates. These issues were explored using OECD manufacturing and trade data for the twenty-year period 1980-1999. The study attempted to formalise and test these claims.

The PILOT work showed that overall economic structures of OECD economies have changed, particularly reflecting the growth of financial services, and social and community services. Within manufacturing, however, structural change has occurred but has been rather small and does not account for the manufacturing growth that has occurred. There is considerable variation in manufacturing structures across OECD economies – the study argued that structural diversity would diminish over time if growth were high-tech driven. However, this did not occur – comparative structures persisted over time and growth performance across countries was not correlated with shares of high-tech manufacturing. The slowness of structural change means that low-tech and medium-low-tech sectors remain by a wide margin the largest components of manufacturing output and employment in OECD economies. Finally, the study examined trade patterns for low and medium-low-tech sectors and showed that changing domestic demand for low-tech manufactures has largely been met by changing domestic production. There has been some widening of trade deficits but this has been small and there is no trade-driven ‘hollowing out’. The study argued in conclusion that these industries persist because of pervasive innovation within them: technological upgrading constantly renews them which accounts for their survival.

Appraisal: This study was a ‘first-look’ at a multi-sectoral approach to growth using disaggregated industry data sets. The study succeeded in showing the complexity of growth experience across the OECD and the need for a multi-sectoral approach that does not privilege high-tech sectors. However, it had important limitations. First, it focussed only on GDP growth rates, neglecting productivity measures. Second, it focussed only on the direct impact of high tech and LMT sectors, neglecting the idea that high-tech sectors might have impacts indirectly via flows of capital and intermediate groups across sectors.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

32 WIDER RESEARCH ON LMT INDUSTRIESIt is worth noting that despite the attention paid to high-tech activities, there has always been a degree of attention to what are here called LMT activities. For example, many years (indeed many centuries) before biotechnology, the economics and technology of plant improvement have been intensively studied (see Kloppenburg 1990 for a survey which stresses the integration between farming, seed technologies and economic change over the long run). In recent years LMT activities have been more explicitly addressed in economic histories of industrialisation. Scranton (2000) showed the prevalence of such industries in US industrialisation, exploring the dynamics of innovation across a wide range of product groups in the less-studied sectors of the US economy. In a major study of technology and early British industrialisation, Bruland (2004) argued that the focus on technologies such as steam power and mechanised textile technologies in early industrialisation is misplaced, and that understanding industrialisation requires attention to industries such as agriculture, food processing and distribution, glass manufacture and so on. She showed that such radical innovations as knowledge codification, replaceable parts, production lines, national distribution systems and large-scale enterprise management systems originated in agriculture and food industries. More recently Von Tunzelmann and Acha have argued that it no longer makes sense to distinguish between sectors in terms of technologies:

‘Sectors are generally taken to be identifiably similar aggregations of productive activities. Conventionally, sectors of all types were supposed to be recognizably different from one another not only in the goods and services they produced but also in the technologies and processes they used to produce them. However the boundaries have become blurred in both dimensions. Technologies originally developed for one set of products spill over into use in the production or “architecture” of other sets of products. Moreover, new technologies more often tend to supplement and complement old technologies rather than replace them. One simple consequence is that even “old” products can be produced by, or partly consist of, elements drawn from what had previously been a totally different set of activities … as a result, conventional classifications of sectors as high- or low-tech, as long practiced by the OECD, are becoming less and less useful for analysis, though their sway still holds in government policy making.’ (Von Tunzelmann and Acha, 2005: 408-9)

There is a range of studies of LMT industries that has yet to be integrated into a shared conceptual or policy framework. For example, Maskell (1998) explored how the Danish furniture industry not only survived but grew in the high-cost environment of Denmark, and Kaplinsky and Readman (2005) showed that furniture industries, on the world scale, are characterised by significant technological upgrading. A recent special issue of the International journal of Technology and Globalisation focused on the wine industries of Italy, Chile, Australia and Argentina, exploring innovation and knowledge creation in what is a rapidly growing LMT industry (see Smith 2007 for an overview). These examples could be multiplied, but there remains a need to articulate a conceptual framework that could illuminate the role of these industries in growth generally.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

33POLICY IMPLICATIONS FOR AUSTRALIAThe PILOT project is strongly relevant to innovation policy discussion and debate in Australia for several reasons. First, LMT industries are a central component of the Australian industrial structure, accounting for significant proportions of output and exports, and appear to have a long-term future within the overall structure. Second, PILOT showed that these industries persist, can and do innovate, and can be the basis of growth; however, they do face risks and uncertainties in innovation that may offer a basis for policy support. Finally, the Australian ‘knowledge infrastructure’ of universities and research institutes is, in practice, committed to these sectors, in terms of research priorities, personnel and funding, and the ideas concerning knowledge use that were developed in PILOT may be of relevance for infrastructure management and policy in Australia.

PILOT produced at least three big results, which are important in policy terms.

First, one big aim of policy ought to be to support the development of capabilities that cannot easily be imitated or competed away. It is these kinds of activities that command income premia, and that enable persistence of activities and ‘virtuous circles’ of innovation and growth. One problem of high-tech development is that many high-tech products (in electronics and pharmaceuticals, for example) are, in fact, very easy to imitate and competitive positions can be hard to sustain. PILOT, by contrast, suggested the important conclusion that LMT companies are capable of being highly competitive, and surprisingly capable of protecting competitive positions:

The specific competences which many low-tech companies possess cannot easily be copied by potential competitors because they are deeply embedded in the social system of a company and its local environment, which makes them difficult to transfer and thus fairly inaccessible to competitors. (Hirsch-Kreinsen, 2006:18)

This suggests that supporting LMT industries ought to be an important priority on the agenda of government. This is supported by the fact that many LMT firms appear to be oriented towards highly specific markets in which high levels of technological specialisation exist. The firms studied by PILOT are not producing in commodity markets, where technical characteristics are uniform and competitiveness is determined largely by costs. Rather they are in technologically differentiated product groups, supported by quite specific skills characteristics in local labour markets, which confer strong competitive advantages. Are such considerations important to the strategic development of LMT sectors in Australia? If so, how might competitive specialisations be supported through the innovation policy system? These seem to be key questions for discussion in Australia.

Second, in thinking about how policy might help sustain these competitive positions, PILOT results suggest that it is important to consider how to support the complex knowledge bases of these firms. The reason that this is a policy issue is that knowledge used by LMT firms frequently involves flows from other agencies, and knowledge flow

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

34 from organisations in the knowledge infrastructure. This is a key issue in Australia, which possesses a large infrastructure of universities and research institutes, which have been historically closely geared to LMT activities, and where R&D activities often remain relevant to them (see Basri, 2006, Appendix A, p.254, which shows that the Australian university system performs R&D across 17 manufacturing sectors, including all of the LMT sectors discussed in this report). While PILOT showed that there are strong collaborative links between LMT firms and infrastructural organisations it did little to explore how the cognitive flows really worked, or how they are affected by the organisation and funding structures of universities and public research bodies. This is also an important question for Australia, especially given the complex changes in the governance of universities and public research organisations in recent years. The interactions and flows of knowledge into LMT sectors have been closely mapped in some sectors (see Smith and Marsh 2007, on the wine industry). However there remain major gaps in our understanding of knowledge creation and flow processes in Australia, and this ought to be an important policy research priority in the period ahead.

Third, PILOT suggested that LMT firms face particular training challenges and that this should be a policy concern. This is not just a matter of vocational training, but can also involve tertiary research training that feeds into broad industry knowledge bases. Training at both levels appears to work very well in some sectors in Australia (such as wine, with 12 universities running teaching on wine, and activities in TAFEs, research institutes etc), but there is a wider question about how to develop training and technology careers across LMT industries.

More generally, PILOT poses questions for the framing of innovation policy in Australia. Throughout the reform period, since the mid 1980s, the rationales for innovation policy have been couched in the language of sector-neutrality. This is often articulated in relation to the idea that ‘picking winners’ is not a legitimate task for government. PILOT is clearly not suggesting that government should ‘pick winners’, but it is critical of the way in which the principal of sector neutrality has led to a policy neglect of LMT sectors. It is clear from PILOT that the EU does not adequately accommodate the fact that its economy rests strongly on LMT industries. Both the national research priorities across the Member States and the EU level FRAMEWORK programme (the main funding channel at the EU level) remain focused on areas such as ICT, nanotechnology and biotechnology. There is little evidence of any effort to look closely at the specific problems and challenges of the LMT sectors.

Australia has not neglected LMT industries to the same degree. It has a complex array of policy instruments that are oriented in one way or another to the industries discussed in this paper. These include the Cooperative Research Centres (CRC) programme, which has more than 50 centres, at least half of which are in LMT-relevant areas; the Rural Research and Development Corporations (RRDC), which seek to integrate corporate strategies and research priorities across agribusiness areas, including wine, dairy and meat production; and the Commercialising Emerging Technologies (COMET) programme. In addition to these specifically government

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

35instruments, there are many industry-run agencies such as AMIRA, the Australian Mineral Industries Research Association, which has strong international links. The broad issue for Australia in this area might not so much concern the actual policy instruments as the articulation of rationales in relation to ideas of sector neutrality. As the EU experience demonstrates, that this carries with it a risk of conceptually impoverished policy making.

Finally, Australia faces some quite specific challenges in LMT sectors. Australia’s LMT sectors are heavily geared towards resources (particularly fuels production, in the shape of coal) and the agri-food complex, which are likely to be affected by international emissions control regimes and changes in weather patterns associated with climate change. This suggests that strategic consideration of the climate sensitivity of LMT sectors in Australia may be important in ensuring their continuing viability. The Australian government has established the CSIRO Climate Adaptation Flagship to address the issue of adaptation: it may be worth considering how innovation policy could articulate with this and other work to address climate change.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

36 LIST OF ABREVIATIONSPILOT PartnersAIER Austrian Institute of Economic Research (WIFO),CAULU.SSI.PEM Catholic University of Lublin Faculty of Social Science, PolandDCU.BS Dublin City University Business School, IrelandFILOV Institute for Labour Foundation, Bologna, ItalyISFE Institute for Social Research, Munich, GermanyRIT.IEM Royal Institute of Technology, Stockholm, SwedenSTEP Studies in Technology, Innovation and Economic Policy, Olso,

NorwayUDTM.ESS.TS University of Dortmund, Economic and Industrial Sociology,

GermanyUjAG.MAN jagiellonian University Institute of Management, Krakow, PolandUOVE.FUN Foundation University of Oviedo, SpainVTT.GST Technical Research Centre (VTT), Group of Technology Studies,

Finland

GeneralAIPC Australian Industry Productivity CentresAMIRA Australian Mineral Industries Research AssociationANBERD OECD Analytical Business Enterprise Research and Development

database.ANZIC Australian and New Zealand Standard Industrial ClassificationBRICS The rapidly industrialising countries Brazil, Russia, India, China and

South Africa.COMET Commercialising Emerging Technologies programCRC Co-operative Research CentreCSIRO Commonwealth Scientific and Industrial Research OrganisationERAWATCH A European Commission initiative collecting data on European

national and regional research profiles, organisations, programmes and documents.

EU European UnionFIG Food Innovation GrantsGDP Gross Domestic ProductICT Information and Communication TechnologyISIC International Standard Industrial ClassificationLMT Low and Medium TechnologyOECD Organisation for Economic Cooperation and DevelopmentPILOT Policy and Innovation in Low-Tech studyR&D Research and DevelopmentRRDC Rural Research and Development CorporationSITC United Nations Standard International Trade ClassificationSTAN OECD STructural ANalysis database for Industrial AnalysisTAFE Technical and Further EducationWP Work package

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

37REFERENCES

1. PILOT documents: working papers, reports and publications (articles and books)

Bender, G., 2006, Peculiarities and Relevance of Non-Research-Intensive Industries in the Knowledge-Based Economy, Final Project Report, European Commission (Project HPSE-CT-2002-00112)

Carroll, P., Pol, E., and Robertson P., 2000, ‘Classification of industries by level of technology: an appraisal with some implications’, Prometheus, Vol. 18, pp.417-446

Gustavsson, L., Laestadius, S., 2004, Industries and Technologies of the Past? – Four Swedish Low-Tech Firms Facing the Knowledge Society, PILOT project working paper, unpublished

Hirsch-Kreinsen, H., jacobson, D., Robertson, P. (eds.), 2006, ‘“Low-Tech” Industries: Innovativeness and Development Perspectives - A Summary of a European Research Project’, Prometheus, Vol 24 No 1, pp.1-21

Hirsch-Kreinsen, H., jacobsen, D., Laestadius, S., and Smith, K., 2003, Low and medium technology industries in the knowledge economy: state of the art and research issues, European Commission (Project HPSE-CT-2002-00112)

Heanue, K., jacobson, D., 2005, WP4 Networking and Value-Chain Report, PILOT project working paper, unpublished

Palmberg, Ch., 2004, Low-Tech Innovations for the High Seas – The Case of Propulsion Systems and Finnscrew, PILOT project working paper, unpublished

Pedersen, T. E., 2004, Norwegian PILOT Case Study – Metal Working Company 2, PILOT project working paper, unpublished

2. PILOT Papers published in Hartmut Hirsch-Kreinsen, David Jacobson and Staffan Laestadius (eds), 2005, Low Tech Innovation in the Knowledge Economy (Frankfurt: Peter Lang):

Hartmut Hirsch-Kreinsen, David jacobson, Staffan Laestadius, Keith SmithLow and Medium Technology Industries in the Knowledge Economy: The Analytical Issues(pp. 11-30)

Tore Sandven, Keith Smith, Aris KaloudisStructural Change, Growth and Innovation: The Roles of Medium and Low-Tech Industries, 1980 – 2000(pp. 31-59)

Staffan LaestadiusThe Classification and Taxonomy of Industries – Measuring the Right Thing(pp. 63-84)

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

38 Gerd BenderInnovation in Low-Tech Companies – Towards a Conceptualisation of Non-Science-Based Innovation(pp. 85-98)

Staffan LaestadiusInnovation – On the Development of a Concept and its Relevance in the Knowledge Economy(pp. 99-122)

Paul L. Robertson, Eduardo Pol, Peter CarollReceptive Capacity of Established Industries as a Limiting Factor in the Economy’s Rate of Innovation(pp. 123-143)

Hartmut Hirsch-KreinsenLow-Tech Industries: Knowledge Base and Organisational Structures(pp. 147-165)

Klaus SchmierlLocation Factors and Competence Patterns in Low-Tech Sectors(pp. 167-192)

Andrea Bardi, Daniela FreddiFrom Industrial District to Company Network(pp. 193-212)

Kevin Heanue, David jacobsonGlobalisation and Embeddedness in Low-Tech Industries: Some Evidence From Ireland(pp. 213-231)

Andrea Bardi, Silvano BertiniGlobal Competition and Industrial Cluster Initiatives in Emilia-Romagna(pp. 233-251)

Trond Einar PedersenTwo Types of ‘Low-Tech’ Sophistication: Production Techniques, Product Design and Formal Competence in Norwegian Mechanical Engineering(pp. 253-284)

Linda Gustavsson, Staffan Laestadius Will They Survive? – Four Swedish Low-Tech Firms Facing the Knowledge Economy(pp. 285-311)

David jacobson, Kevin Heanue Implications of Low-Tech Research for Policy(pp. 315-332)

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

393. Dortmund Low-Tech Workshop

(These papers are to be published in Hartmut Hirsch-Kreinsen and David jacobson (eds.), Innovation in Low-tech Firms and Industries, Edward Elgar; series ‘Industrial Dynamics, Entrepreneurship and Innovation’ edited by David Audretsch, Dirk Fornahl and Hariolf Grupp. Approximate date end 2008.)

Bender, G., 2007, How to grasp innovativeness of organizations? – Outline of a conceptual tool

Freddi, D., von Tunzelmann, N., 2007, The integration of old and new technological paradigms in LMT sectors: The case of mechatronics

Godin, B., 2007, The moral economy of technology indicators

Laestadius, S., 2007, High-tech innovation in catching up countries: Conditions and perspectives

Toivonen, M., 2007, Industrial innovations in relation to service sectors

Wziatek-Kubiak, A., 2007, Innovation versus cost competitiveness in the low and medium technology-based economy. A case of Poland

Gerybadze, A., 2007, Standard-setting Competition and Open Innovation in Low- and Medium-Tech Industries

4. General References

Australian Bureau of Statistics, 2005, Australian System of National Accounts, 2004-05 (cat. no. 5204.0), Canberra, ACT

Australian Bureau of Statistics, 2006, International Trade in Goods and Services, Australia jul 2006 (cat. no. 5368.0), Canberra, ACT

Australian Bureau of Statistics, 2006, Labour Force, Australia, Detailed, Quarterly Feb 2006 (cat. no. 6291.0.55.003), Canberra, ACT

Basri, E., 2006, Technological Collaboration and the Innovation Activities of Australian Firms, PhD thesis, Australian National University

Bush, V., 1960, Science - the Endless Frontier. A report to the President on a program for postwar scientific research (New York: Arno Press), 1980 (Facsimile reprint of National Science Foundation Edition, 1960)

Bruland, K., 2006, “Industrialisation and technological change”, Roderick Floud and Paul johnson (eds.), The Cambridge Economic History of Modern Britain: Industrialisation 1700-1860, pp. 117-146 (Cambridge: Cambridge University Press)

Chandler, A.D., 1977, The Visible Hand: The Managerial Revolution in American Business (Cambridge: Harvard University Press)

Chandler, A.D., 1962, Strategy and Structure: Chapters in the History of the American Industrial Enterprise (London: MIT Press)

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

40 Chandler, A.D., 1990, Scale and Scope: The Dynamics of Industrial Capitalism (Cambridge: Harvard University Press)

Chandler, A.D., 2006, ‘How High Technology Industries Transformed Work and Life Worldwide from the 1880s to the 1990s’, Capitalism and Society, Vol 1 Issue 2, pp.1-55.

Hatzichronoglou, T., 1997, ‘Revision of the high-technology sector and product classification’. STI Working Papers, 1997/2, (OECD: Paris)

Kaplinsky, R., and Readman, j., 2005, ‘Globalization and upgrading: what can (and cannot) be learnt from international trade statistics in the wood furniture sector?’, Industrial and Corporate Change, Vol 14 No 4, pp. 679-703

Kloppenburg, j.R., 1990, First the Seed. The Political Economy of Plant Biotechnlogy 1492-2000 (Cambridge: CUP)

Maskell, P., 1998, ‘Successful low tech industries in high cost environments. The case of the Danish furniture industry’, European Urban and Regional Studies, 5 (2) 99-118

OECD, 1986, OECD Science and Technology Indicators, No 2: R&D, Innovation and Competitiveness, (OECD:Paris)

Scranton, P., 2000, Endless Novelty: Specialty Production and American Industrialization, 1865-1925 (Princeton University Press)

Smith, K., 2007, ‘Technological and Economic Dynamics of the World Wine Industry’, International journal of Technology and Globalization, Vol 3 Nos 2/3, pp. 127-137

Smith, K. and Marsh, I., 2007, ‘Wine and Economic Development: Technological and Corporate Change in the Australian Wine Industry’, International journal of Technology and Globalization, Vol 3 Nos 2/3, pp.224-245

Von Tunzelmann, N., and Acha, V., 2005, ‘Innovation in “Low-Tech” Industries, in jan Fagerberg et al, The Oxford Handbook of Innovation (Oxford: OUP)

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

41APPENDIx A: UNPUBLISHED PAPERS ON LOW AND MEDIUM TECHNOLOGY INDUSTRIES AS OF MAY 2007Tine Aage, Fiorenza Belussi, Silvia Sedita & Daniele Porcellato. The emergence of innovation leaders and knowledge networks in low-tech industrial districts.

Jose Albors-Garrigos, Jose L. Hervas-Oliver & Emilio Golf-Laville. Heterogeneity of regional innovation systems in low-tech industries and lessons for policy makers: the case of Spanish Eastern clusters.

Joaquin Alegre & Ricardo Chiva. R&D outsourcing and product innovation in the ceramic tile industry.

Roberto Alvarez, Jose Miguel Benavente & Gustavo Crespi. High, medium and low technology firms in developing countries: the case of Chile.

Isabel Alvarez & Jose Molero. Innovation and absorption capabilities in low tech industries.

Bruno Cesar Araujo Sergio Kannebley Jr. & Julia Valer. Economic performance derived from innovation: an empirical analysis of Brazilian industrial firms.

Akram Avami & Sourena Sattari. Estimating energy efficient technological change: the brick industry in Iran.

Victor Banuls Silvera. Key technological challenges for the primary industries sector.

Helena Barnard & Andre Buys. Low to medium categories of research intensity and how they relate to sectoral patterns of technological change.

Gerd Bender. How to grasp innovativeness of organisations? Outline of a conceptual tool.

Sara Bonesso. The impact of knowledge novelty and complexity on technology sourcing decisions: the case of Italian machine tool industry.

Jasper S. Caerteling, Johannes I. M. Halman & Andre G. Doree. Technology development in road infrastructure: how to cope with conflicting roles of government?

Cesar Camison. Technology diffusion and localised learning in inter-firm networks: the case of low-technology industries.

Vivek Chaudhri. Policy imperatives for innovative capacity in LMT industries: knowledge governance or harnessing the power of herds.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

42 Liang-Chih Chen. Learning through informal local and global linkages: the case of technological upgrading of Taiwan’s machine tool industry.

Pin-Yu Chu, Feng-wu Lee & Chien-Wen Huang. Challenge of technology upgrading in low-and-medium technology industries in Taiwan.

Lorenzo Ciapetti. Technological change as an adaptive process: evidence from an Italian mechanical cluster.

Paola Cillo, Luigi M. De Luca, David Mazursky & Gabriele Troilo. The role of market learning capabilities in low-tech innovation: evidence from the Italian fine fashion industry.

Francesco Crespi, Mario Pianta & Andrea Vaona. Innovation strategies in low and medium technology manufacturing and services industries.

Bernhard Dachs, Bernd Ebersberger & Steffen Kinkel. Does innovation in low-technology manufacturing follow a reverse product cycle?

Jun Du, Sourafel Girma & Michael Henry. Knowledge sourcing and innovation: panel data evidence for firms in China’s low and medium technology industries.

Paulo N. Figueiredo, Marcela Cohen & Saulo Gomes. Technological capability accumulation, sources of learning, and policy regimes in the late-industrialising context: sector and firm-level evidence from the pulp and paper industries in Brazil (1950-2006).

Ali Fikirkoca, Bahar C. Erbas & Arcan Tuzcu. Understanding local and global dynamics in LMTs: the case for Turkey as a developing country.

Daniela Freddi. The integration of old and new technological paradigms in LMT sectors: the case of mechatronics.

Joao Furtado. Technological change in low-and medium-technology industries: Brazilian Ethanol Program and the challenges ahead.

Francesco Garibaldo, Andrea Bardi & Silvano Bertini. Globalisation and territory, a new trend? A case in point: the Emilia Romagna region.

Vivek Ghosal & Usha Nair-Reichert. Targeted investments in modernization and gains in productivity: evidence from firms in the global paper industry.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

43Peter T. Gianiodis. Maneuvering in a new technological regime: the patenting of financial innovation.

Nuno Gil & Marcela Miozzo. Technological change in the regulated airport industry: effects of the selection environment and flexibility.

Andrew Godley. Gatekeepers and innovation in a mature food industry: the role of retailers in the creation of the British poultry industry, 1955-1965.

Hadi Tolga Goksidan. Inter-organisational relations in an organised industrial district: trust between firms in OSTIM, Turkey.

Christoph Grimpe & Wolfgang Sofka. Returns on absorptive capacities in low-, medium- and high-technology: empirical evidence from eleven European countries.

Jiancheng Guan, Jian Jiang & Xiangju Qu. Distribution and evolution of innovation efficiency: some evidences from Chinese low- and medium-technology industries.

Linda Gustavsson & Staffan Laestadius. Knowledge formation in Swedish LMT industry - exploring the role of synthetic and analytic knowledge in innovation and competitiveness.

Juan Julio Gutierrez. Effect of foreign technology diffusion on the demand of skilled labor in low and medium technology (LMT) sectors.

Johan Hauknes & Mark Knell. Inter-linkages between high tech and low tech industries: the example of France, Norway and Spain.

Christoph Hauser, Gottfried Tappeiner & Janette Walde. Bridging the gap between a low-technology industry and a high-income economy: a case study of innovation in the province of Bolzano.

Attila Havas. The pitfalls of benchmarking exercises based on ‘high-tech’ indicators: policy implications for European catching-up economies.

Kevin Heanue & David Jacobson. Innovation and embeddedness in low and medium tech industries.

Martin Heidenreich. Innovative behaviour and regional dynamics of low-tech regions in Europe.

Jose L. Hervas-Oliver & Jose Albors-Garrigos. Firm’s strategies to innovate in low-tech clusters: a complex set of capacities and relational resources.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

44 Hartmut Hirsch-Kreinsen. “Low-Tech” Innovation Mode?

Shirley J. Ho & Sushanta K. Mallick. The impact of information technology on the banking industry: theory and empirics.

Jonathan C. Ho & Chung-Shing Lee. An innovation lifecycle perspective on innovation patterns in low- and medium-technology industries in Taiwan.

Erwin Hofman, Berri de Jonge, Johannes I.M. Halman & Johannes T. Voordijk. Changing design rules: how to develop and implement modular product architectures in the house building industry.

Tai-Hsin Huang & Chih-Hai Yang. Measuring efficiency dynamics and technology gaps among different manufacturing industries: are low- and medium-tech firms really less efficient than high-tech firms?

David S. Jacobson & Helen K. McGrath. Network innovation in the printing industry in Dublin, Ireland.

David S. Jacobson & Bernard Musyck. Distributed knowledge bases in the aviation industry.

David S. Jacobson & Chris van Egeraat. The evolution of the software manual printing industry in Ireland.

Jun Jin. New product development of low-technology industries based on the development of professional markets.

Jong Seok Kang, Hyuck Jai Lee, Susan E. Cozzens & Alan L. Porter. Monitoring R&D strategy of a firm through bibliometric analysis: tracking chronological change of patent classification network.

Sergio Kannebley Junior & Fernando Moraes de Freitas. Innovative activities in Latin America: a comparison between Brazil, Argentina and Mexico.

Jimme A. Keizer. Wrestling to make new business in LMT firms.

Marcus Matthias Keupp, Alexander Conreder & Oliver Gassmann. Radical innovations despite a low R&D intensity: a study of innovating firms in the food and beverage industry.

Eva Kirner & Steffen Kinkel. Innovation strategies of low- and medium-technology firms.

Paula Kivimaa & Petrus Kautto. Policies making or breaking environmental innovation? Technological changes in the pulp and paper industry.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

45Holm-Detlev Kohler. Profit strategies and innovation strategies in low-tech firms.

Kati-Jasmin Kosonen. Innovation platforms as a framework for evolving medium tech industrial clusters in less favoured regions.

Gianvito Lanzolla & Fernando F. Suarez. Firm ownership and information technology adoption. A comparative study in the publishing industry in Brazil, China and the USA.

Samuli Leppala. Tracking informal interindustrial knowledge spillovers among low- and medium-tech SMEs: towards a creativity-based approach.

Ping Li, Ye-zhuang Tian, Zhong-ying Qi & Li Zhang. The empirical research on the effect of the competitive priorities on the manufacturing performance in the accumulated relation model.

Ulrich Lichtenthaler. The role of technology strategy and patent portfolio in low- and medium-technology firms.

Joseph Y.C. Lu, Zipporah S.L. Wu & Peter J.S. Sher. Reputation effect, relationship effect of university research; gains from collaboration with universities research in industrial technology licensing.

Pilar Marques-Gou. How do LMT firms feel about R&D cooperation? Exploring barriers to cooperation in the Spanish manufacturing sector.

M. Cristina Martinez-Fernandez & Samantha Sharpe. Knowledge intensive service activities of manufacturing firms and the role of local government agencies.

Sandro Mendonca. Brave old world: accounting for “high-tech” knowledge in “low-tech” industries.

Andrea Morrison. Innovation and external knowledge sources in the furniture industry: evidence from Italy.

Federico Munari, Raffaele Oriani & Filippo Carlo Wezel. Incumbents’ survival and the emergence of incomplete technological substitution.

Patricia Nelson. Context is crucial: transforming japan’s camera industry from low/medium technology to high technology, 1945-2006.

Atsushi Osanai. Dilemma between new and existing technologies: separation and coexistence of old and new technologies in the Television Development Division of Sony Corporation.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

46 Margherita Pagani & Laura A. Ripamonti. System integrators as “knowledge brokers” for SMEs adopting floss in non-IT industries.

Iztok Palcic, Kristo Pandza, Brane Semolic & Andrej Polajnar. Acquiring new technology in an industrial cluster: a case from Slovenian toolmakers cluster.

Laxmi Prasad Pant & Helen Hambly Odame. Innovation triangles: a metaphor to inform linkage policies for innovations in agriculture and food in low-income countries.

Laxmi Prasad Pant, Helen Hambly Odame, Andy Hall & Rasheed Sulaiman. Stakeholder linkages for innovations in high value agriculture: mango in Andhra Pradesh, India.

Pankaj C. Patel. Easier than thought? Critical role of skill intensity in low-tech venture failures.

Joshua M. Pearce, Scott Albritton, Gabriel Grant & Garrett Steed. Enabling innovation in low and medium technology industries for sustainable development.

Bettina Peters, Tobias Schmidt & Wolfgang Sofka. Low tech sources for innovation - low tech, high tech impact?

Cheng Qiaolian & Tian Yezhuang. Characteristics and trend of technology development in China’s LMT manufacturing firms.

Saon Ray. International technology diffusion and productivity.

Thierry Rayna & Ludmila Striukova. How to create modern “golden oldies”: technological change in the electric guitar industry.

Jose Carlos Rodriguez Chavez & Mario Gomez Aguirre. Innovative performance and absorptive capacity among small and medium firms in Mexico.

Lluis Santamaria, Maria Jesus Nieto & Andreas Barge. Beyond formal R&D: taking advantage of other sources of innovation in low- and medium-technology industries.

Klaus Schmierl & Tobias Kampf. Innovation and knowledge networks in the “old economy” - intersectoral innovation processes in the German paper industry.

Anja Schulz. Strategic positioning on innovation in low tech industries of old economies - systemic weaknesses and solutions.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

47Shigeyuki Sekine. Profitable standardization of LMT products with black box strategy.

Maria Jose Silva, Mario Raposo & Manuel Mira Godinho. Low- and medium-tech industries in small open economies: a logit approach to the determinants of innovation capability.

Heekyu Sohn. Drivers for increased wind power production in the United States.

Mark Southern & Eamonn Murhpy. Innovation programmes: a model for assessing their potential success.

Mark Spoerer. The impact of innovation on market structure and economic performance. A case study of the sheet glass industry in Weimar Germany (1925-1932).

Bruce S. Tether & Jeremy Howells. Changing understanding of innovation in services: from technological adoption to complex complementary changes to technologies, skills and organization.

Marja Toivonen. LMT sectors and service sectors as innovators: similarities and their implications.

Carlos Torres-Fuchslocher, Andres Ulloa-Oliva & Carlos Moreno-Falcon. Technological change through domestic suppliers in resource-intensive industries: the cases of Chilean forestry, mining and aquaculture.

Kuen-Hung Tsai & Jiann-Chyuan Wang. External technology sourcing and innovation performance in LTM sectors: an analysis based on Taiwanese technological innovation survey.

Yi Wang. Innovation in low- and medium-technology (LMT) sectors in China: regional differences, networks and policy dilemma.

Fiona Whitehurst & Franek Siedlok. From closure to centre of excellence: the role of local embeddedness, self-organisation and public policies in knowledge retention and development.

Qiang Wu. The relationship between high-technology export and low-and-medium-technology export: an empirical study of 86 economies.

Chong Xin, Chunsheng Shi & Ping Li. How does organizational innovation affect technological innovation and organizational performance? An empirical analysis for Chinese low- and medium-technology firms (1993-2005).

Guo-Ying Xiu, Bo Yu & Fu-Yu Huang. Knowledge representation of low-and-medium-technology firms under Chaos Fuzzy Logic.

INN

OVATIO

N, G

RO

WTH

AN

D P

OLICY IN

LOW

AND

MED

IUM

TECH

IND

USTR

IES

48 Yang Yang, Yezhuang Tian & Linlin Zhao. Combination strategy and its choice of competitive priorities oriented to low-and-medium-technology manufacturing firms.

Yang Yang, Yezhuang Tian & Linlin Zhao. Survival cycle system and its evaluation oriented to low-and-medium-technology firms.

Yang Yang & Linlin Zhao. The choice and international comparison of continuous improvement’s measure in low-and-medium-technology firms.

Guo Yung-Hsing. How developing countries’ low- and medium-technology industry compete with multinationals - lessons from China’s home electronics.

Messaoud Zouikri & Luc Tessier. Innovation in the construction and building sector in France: an empirical study at firm level using CIS4 data.