challenging issues in initiating ris development in indonesia

CHALLENGING ISSUES IN INITIATINGCHALLENGING ISSUES IN INITIATINGREGIONAL INNOVATION SYSTEM DEVELOPMENT:REGIONAL INNOVATION SYSTEM DEVELOPMENT:

THE CASE OF INDONESIATHE CASE OF INDONESIA

Tatang A. TaufikAgency for the Assessment and Application of Technology

(Badan Pengkajian dan Penerapan Teknologi / BPPT)

Sub-Committee on S&T Infrastructure and Resources Development (SCIRD).The 7th ASEAN Science and Technology Week (7th ASTW)

2nd Science Congress and Sub Committee ConferencesJakarta, August 5 – 7, 2005

2005 t@t

OUTLINEOUTLINE

1. INTRODUCTION/BACKGROUND2. FOCUS OF DISCUSSION3. BRIEF REVIEW4. IDENTIFIED GENERIC AND CHALLENGING

ISSUES : A Policy Perspective5. THE PROPOSED COMMON FUTURE AGENDA6. BRIEF REVIEWS : FROM SOME EARLY

INITIATIVES7. CONCLUDING REMARKS : SOME LESSONS

LEARNT

2005 t@t

1. INTRODUCTION / BACKGORUND 1. INTRODUCTION / BACKGORUND

BRIEF REVIEW INDONESIAN CONTEXT

2005 t@t

1. BRIEF REVIEW1. BRIEF REVIEW

Knowledge/innovation are the increasingly determining and differentiating factor of competitiveness (micro, messo, and macro levels);

Paradigm shifts of the perspective on innovation in the last two decades : From “linear-sequential” perspectives (of “technology push”

and “demand pull” models) to a system perspective/ approach of a dynamic and interactive-recursive model

Some recent trends : more attentions on Interactions and roles of actors ~ triple helix modelLocal/regional dimensions : social learning and social

capital, local specificities, ~ regional innovation system and industrial clusters.

Policy implication : national and regional contexts/dimensions of the innovation policy.

2005 t@t

2. THE INDONESIAN CONTEXT2. THE INDONESIAN CONTEXT

Eroding competitive position of Indonesia in the international arena ~ widening gap even with some other ASEAN countries;

Not yet fully recovered from the “devastating” 1997 crises ~ followed by political and other influential changes;

Indonesian context ~ innovation system : a diverse cultural and regional uniqueness-rich country; a large country problem with a small country capacity/

capability; More attention to the regional contexts :

Regional roles in development : the shift from centralized economy to regional autonomy / decentralization;

Underdeveloped local specificities potentials for regional unique advantages;

Regional innovation system development : the key to future regional competitiveness.

2005 t@t

2. FOCUS OF DISCUSSION IN THE PAPER:2. FOCUS OF DISCUSSION IN THE PAPER:

KEY AREAS IDENTIFIED IN INITIATING THE REGIONAL INNOVATION SYSTEM DEVELOPMENT

A BRIEF REVIEW FROM SOME EARLY STAGE OF THE INITIATIVES

2005 t@t

3. BRIEF REVIEW ON INNOVATION SYSTEM AND 3. BRIEF REVIEW ON INNOVATION SYSTEM AND INNOVATION POLICYINNOVATION POLICY

INNOVATION, INNOVATION SYSTEM, AND INNOVATION POLICY

SOME RECENT TRENDS(Appendices)

2005 t@t

4. IDENTIFIED GENERIC AND CHALLENGING ISSUES :4. IDENTIFIED GENERIC AND CHALLENGING ISSUES :A Policy PerspectiveA Policy Perspective

Attentions based on some dimensions :2. Common problems ~ some comparative indicators;3. Innovation policy issues :

– market and government failures;– systemic failures.

4. Regional dimensions/contexts.

2005 t@t

GENERIC AND CHALLENGING ISSUESGENERIC AND CHALLENGING ISSUESIN INNOVATION SYSTEM DEVELOPMENT :IN INNOVATION SYSTEM DEVELOPMENT :

1. Weaknesses in general framework. These are related to some issues such as : Fundamental framework issues related to the innovation

system, e.g., :• Regulatory impediments to development of business and

innovation;• Weaknesses in legal and regulatory development needed

to foster innovation progress;• Weaknesses in specific infrastructural supports important

to innovation;• Costly bureaucracy administration process;

Very limited investment (financial supports) for innovative activities;

Uncompetitive fiscal supports (taxation structures/schemes) for innovation;

Weaknesses related to intellectual assets (including IPR awareness, protection, and law enforcement).

2005 t@t

1. Weaknesses in institutions and S&T supports, and low knowledge (technological) absorption of SMEs. These are related to “not yet properly” developed (and/or missing) important

functions in the innovation system, and weaknesses in science and technological supports relevant

to the development of the best local resources and specificities;

on the other hand, small and medium enterprises (SMEs) as the majority of the business actors (99% of business actors in Indonesia), in general, have limited capability and opportunity in accessing, utilizing, and developing knowledge (technology) important to their business competitiveness enhancement.

GENERIC AND CHALLENGING ISSUESGENERIC AND CHALLENGING ISSUESIN INNOVATION SYSTEM DEVELOPMENT : IN INNOVATION SYSTEM DEVELOPMENT : (Cont’d)

2005 t@t

1. Weaknesses in mutually beneficial linkages and interactions, and collaboration in diffusion of innovation (including best practices and/or R&D outputs). “Mismatch” in relevance and complementing functions

amongst knowledge pool development (knowledge supply side) and technological needs and utilization (demand side), especially by private sectors in many technological areas are widely acknowledged.

Limited development and supports related to both business (commercial) and non-business (non-commercial) technology-based transactions amongst actors, asymmetric information and limitations in capability and opportunity for interactions important to innovation, diffusion and learning process especially in “traditional sectors in the economy” are among policy issues identified that impede mutually beneficial linkages, productive interaction,and synergetic collaboration amongst actors in both the national and regional innovation systems.


2005 t@t

1. Weaknesses in innovation culture. Among other factors, these are related to – Low appreciation to creativity/innovativess spirits and

entrepreneurial business profession; – Slow development in entrepreneurship knowledge and skills,

and weak education system in supporting entrepreneurial culture development;

– Limited talents (high quality human resources) in many regions (regional brain drains), low high talent mobility and interactions important to innovation and entrepreneurship in the society;

– Public authorities in general (at the national and regional levels) are also among the weakness points for both the development of innovation and entrepreneurhsip in their environments and the significant progress in the society.


2005 t@t

1. Weaknesses in development focus, value chains, competence development and improvement of the sources of economic progress. Weaknesses in interrelated business and non-business activities (and actors) important to the economic dynamism and the strong foundations for unique competitive advantages are caused by some underlying factors such as : – Varieties of business activities and the supporting non-business

activities and regional unique competences developed in general are not geared towards the more focused regional competitive advantage development;

– Business/industrial structures and linkages are weak;– Limited leadership and pioneering in progressing innovation and

diffusion of innovation;– Low development of start-up/new innovative companies

(someteimes called as the new technology based firms/NTBFs);

– Most SMEs are lagging behind in creating and capitalzing the opportunities from technological and non technological progress/change.


2005 t@t

1. Global (Globalization) challenge. Various weaknesses (eventually) influence the ”readiness” of Indonesia (at the national and regional levels) to play the better and strategic role in the global arena and responding some important changes to maximize the benefits for and minimize the negative impacts to the society.


2005 t@t

5. THE PROPOSED COMMON FUTURE AGENDA:5. THE PROPOSED COMMON FUTURE AGENDA:THE HEXAGONS OF THE INITIATIVES THE HEXAGONS OF THE INITIATIVES

Some considered aspects of the agenda :

2. Broad and fundamental policy themes

3. Universal to regional contexts of Indonesia

4. Interrelated areas

5. Keys to the initiatives based on current situations

2005 t@t

1. DEVELOPING GENERAL FRAMEWORK1. DEVELOPING GENERAL FRAMEWORKCONDUCIVE TO INNOVATION AND BUSINESS DEVELOPMENT CONDUCIVE TO INNOVATION AND BUSINESS DEVELOPMENT

Developing regional innovation strategies; Regulatory reforms: evaluating and eradicating impeding

regulations; Improving legal supports and environment important to

innovation and businesses; Developing specific infrastructures important (and

“unique”) to the development of regional innovation system;

Improving bureaucracy administration processes; Enhancing the capacity (and capability) to improve

investment in innovation (the financing for innovation); Developing synergetic efforts to create/improve effective

incentive schemes for innovation; Increasing awareness and implementation of the IPR

protection in the regions.

2005 t@t

2. STRENGTHENING THE S&T INSTITUTIONS AND SUPPORTS, 2. STRENGTHENING THE S&T INSTITUTIONS AND SUPPORTS, AND DEVELOPING ABSORPTIVE TECHNOLOGICAL AND DEVELOPING ABSORPTIVE TECHNOLOGICAL

CAPACITY AND CAPABILITY OF SMEs CAPACITY AND CAPABILITY OF SMEs

National and regional S&T institutional reforms; Better rewards/appreciation for S&T human resources; Financial and legal supports to, especially, collective R&D

programs benefiting regional economies; Practical tools for SME upgrading; Better access for SMEs to knowledge databases and

expertise; Enhancing financial supports to strategic SME

technological upgrading.

2005 t@t

3. FOSTERING COLLABORATION FOR INNOVATION AND 3. FOSTERING COLLABORATION FOR INNOVATION AND ENHANCING DIFFUSION OF INNOVATION, BEST PRACTICES ENHANCING DIFFUSION OF INNOVATION, BEST PRACTICES

AND/OR R&D OUTPUTS AND/OR R&D OUTPUTS

Financial and non financial supports to collaborative innovation activities;

Fostering techno-business based intermediaries development (e.g., business development service providers, regional technology clearing house);

Fostering business technological-based linkages; Special technology diffusion/dissemination projects

benefiting to regional economies; Developing an open coordination method/mechanism for

enhancing exchanges of best practices, benchmarking activotoes, public domain of R&D outputs, and policy coordination.

2005 t@t

4. DEVELOPING INNOVATION CULTURE 4. DEVELOPING INNOVATION CULTURE

Increasing public awareness; Education and R&D institutional reforms towards more

entrepreneurial organizations; Entrepreneurship education and trainings; Fostering new/start-up innovative companies (new

technology based firms/NTBFs ~ “technopreneurial” firms);

Regional “reverse brain drain” (talents scouting), and enhancing human resource mobilization;

Capacity building in regional public authority institutions; Regional innovation awards; Umbrella and set aside programs for particular regional

innovation projects.

2005 t@t

5. FOSTERING AND STRENGTHENING INTEGRATED EFFORTS 5. FOSTERING AND STRENGTHENING INTEGRATED EFFORTS OF REGIONAL INNOVATION SYSTEM AND INDUSTRIAL OF REGIONAL INNOVATION SYSTEM AND INDUSTRIAL

CLUSTER DEVELOPMENT INITIATIVES CLUSTER DEVELOPMENT INITIATIVES

Strategic regional-specific R&D programs; Competitive regional innovation development initiative

projects (grant and/or resource sharing schemes); Regional-specific industrial cluster development

programs; Business (SMEs) technological upgrading programs; Regional strategic alliance programs.

2005 t@t

6. DEVELOPING STRATEGIC RESPONSES6. DEVELOPING STRATEGIC RESPONSESTO THE GLOBAL CHANGES TO THE GLOBAL CHANGES

Public awareness and law enforcement of IPR; Developing local/indigenous knowledge/technological

assets (including the legal aspects of the related IPR); Enhancing regional capacity in the MSTQ system; Fostering international collaboration in the regions.

2005 t@t

6. BRIEF REVIEWS : FROM SOME EARLY INITIATIVES6. BRIEF REVIEWS : FROM SOME EARLY INITIATIVES

1. The regions :

• Tegal Regency (Central Java),

• Sumedang Regency (West Java), and

• Barru Regency (South Sulawesi).

2. General framework for collaboration and coordination pattern

3. An example : Tegal Regency ~ The “starting/entry point” activities

2005 t@t

31

Tegal RegencySumedang Regency

Barru Regency

THE REGIONSTHE REGIONS

2005 t@t

Thematic and/or Specific Initiatives

Framework Conditions

Regional DimensionsNational Dimensions

N

A

T

I

O

N

A

L

R

E

G

I

O

N

A

L

GENERAL FRAMEWORKGENERAL FRAMEWORKFOR COLLABORATION AND COORDINATION PATTERNFOR COLLABORATION AND COORDINATION PATTERN

2005 t@t

TEGAL REGENCYTEGAL REGENCY

Central Java

2005 t@t

TEGAL REGENCY: TEGAL REGENCY: THE “STARTING/ENTRY POINT” ACTIVITIES ~ 2003THE “STARTING/ENTRY POINT” ACTIVITIES ~ 2003

Serial awareness and capacity building worskhops. Topics related to competiveness and industrial cluster development;

Consensus building on “the grand strategy” : regional industrial cluster development as the platform of and approach to the regional economic competitiveness development;

Establishing the Regional Competitiveness Council (a quasi-public collaborative institution with membership consists of : business actors, association, NGOs, educational communities, ex-officio reps. from regional government, legislative members, prominent persons);

Starting some industrial cluster initiatives (based on agriculture, manufacturing and tourism industries) and industrial cluster task groups;

Revitalising an industrial district area as a center for services and innovation of technology in the region;

Development of a regional vocational education; Integrating the cluster projects into the annual regional government

program and with some other relevant projects (including some national R&D projects).

2005 t@t

TEGAL REGENCY: RECENT ACTIVITIESTEGAL REGENCY: RECENT ACTIVITIES

Serial awareness and capacity building worskhops. Topics related to regional innovation system development;

Consensus building on the priority activities; In the process of establishing the Regional Research Council; Planning the regional innovation strategy document; Continuing the previously agreed collaborative agenda.

2005 t@t

Members

Office Secretariate

Representatives(from particular

industrial clusters)

Special task force/teams

Functional Groups

Special Committees

Cross-sectoral (and cluster) groups

e.g., :• Promotional• Expertise

e.g., :• Benchmarking• Specific industrial

cluster task groups

INSTITUTION FOR COLLABORATION :INSTITUTION FOR COLLABORATION :The Regional Competitiveness Council (RCC)The Regional Competitiveness Council (RCC)

RCCRCC

2005 t@t

THE ROLE OF BPPT TEAMSTHE ROLE OF BPPT TEAMS

Organizing national and some regional workshops related to regional innovation system themes;

Preparing guidelines (suggested steps and more practical tools/approach) ~ industrial cluster development and regional innovation strategy;

Collecting and disseminating examples of relevant “best practices” ~ industrial cluster development and regional innovation strategy; Planning to develop an internet based as a tool to develop an open coordination mechanism (more simple model adopting from the EU Innovation TrendChart Initiative);

Providing technical assistance : facilitators (technical assistants/expertise) to accompany the regional

counterpart teams, particularly in the initial stage (process) initiating regional consensus building

Some relevant initiatives at the “national level”, e.g.: Policy studies; Collaborations with other organizations; Academic draft on indigenous knowledge/technology protection.

2005 t@t

AN EXAMPLE OF PRACTICAL TOOLS AN EXAMPLE OF PRACTICAL TOOLS (STAKEHOLDER-FRIENDLY)(STAKEHOLDER-FRIENDLY) TO BUILD CONSENSUS ON THE COMMON/COLLABORATIVE TO BUILD CONSENSUS ON THE COMMON/COLLABORATIVE

AGENDA (AND POLICY INTERVENTION)AGENDA (AND POLICY INTERVENTION)

Starting the Industrial Cluster Development Initiatives(drawing some concepts and/or methodologies, e.g., from Porter’s Four Diamonds, for practical developing

practical approaches)

2005 t@t

Agenda Agenda Agenda Agenda

ResultsHierarchy

activities

outputs

purpose

goal

+ - + - + - + -

Stakeholder Mapping Analysing the Business Environment (The Porter’s Four Diamond)

Analysing the Improvement of the Business Environment

Prioritizing Goals/Objectives

Alternative Strategies Program/Activity MatrixGoal/Objective Trees

2005 t@t

7. 7. CONCLUDING REMARKS : SOME LESSONS LEARNTCONCLUDING REMARKS : SOME LESSONS LEARNT(FROM THE INTIAL STAGE)(FROM THE INTIAL STAGE)

2005 t@t

CONCLUDING REMARKS : SOME LESSONS LEARNTCONCLUDING REMARKS : SOME LESSONS LEARNT(FROM THE INITIAL STAGE)(FROM THE INITIAL STAGE)

1. Biggest challenges : – Adapting to the paradigm shift (from a very centralistic and fragmented-

sectoral development approach to a more decentralized, participatory and collaborative effort). The learning process is costly yet a very crucial element of development;

– Commitment/seriousness of the participating actors; – Consistency in following up the agreed common agenda;– Readiness to some paradoxical fenomena of changes.

2. Common Operational but Significant Obstacles : government budget structure and bureaucratic rigidity.

3. Key Success Factors :– “Unique/specific” local potentials;– Strong motivation amongst regional business actors and program

counterparts towards improvement;– Local champions ~ highly motivated and pioneering individuals;– Common platform built upon agreed consensus and widely support to

develop synergetic and implementable activities of regional competitiveness efforts;

– Regional financial supports, especially regional government, for regional-specific starting activities.

2005 t@t

APPENDICES APPENDICES

2005 t@t

3. BRIEF REVIEW ON INNOVATION SYSTEM AND 3. BRIEF REVIEW ON INNOVATION SYSTEM AND INNOVATION POLICYINNOVATION POLICY

INNOVATION, INNOVATION SYSTEM, AND INNOVATION POLICY

SOME RECENT TRENDS

2005 t@t

INNOVATIONINNOVATION

Innovation

Technological ServicesOrganizational Goods

ProcessProcess ProductProduct SystemSystem

“Technocratic” definitions

2005 t@t

SOME PERSPECTIVE DEVELOPMENTS ON INNOVATIONSOME PERSPECTIVE DEVELOPMENTS ON INNOVATION

Technology Push:Technology Push:“Linear-Sequencial” Chains of Capability-driven Forces

1960s – 1970s

Basic Basic ResearchResearch R&DR&DApplied Applied

ResearchResearchManufacturing/Manufacturing/ ProductionProduction

Sales/ Sales/ DistributionDistribution

Demand Pull:Demand Pull:“Linear-Sequencial” Chains of Demand-driven Forces

1970s – 1980s

““Demand”Demand”

Applied Applied ResearchResearch

Basic Basic ResearchResearch

Market Driven:Market Driven:“Interactive-recursive (and Iterative)” Process and as a Learning Process

1980s – . . . .

Manufacturing/ Manufacturing/ ProductionProductionR&DR&D Sales/ Sales/

DistributionDistribution

2005 t@t

THETHE CHAIN-LINK CHAIN-LINK INNOVATION MODELINNOVATION MODEL

Research – Knowledge Creation

Potential Market

Invent and/or Analytical Design

Detailed DesignAndTest

Redesign

and

Produce

Distribute

and

Market

Transfer Processes (various)

Source : Adapted from Kline and Rosenberg (1986).

2005 t@t

NATIONAL RESEARCH AND INNOVATION SYSTEMNATIONAL RESEARCH AND INNOVATION SYSTEM

Source: Erik Arnold & Stefan Kuhlmann, 2001

The potential reachof public policies ...

Framework ConditionsFinancial environment; taxation andincentives; propensity to innovationand entrepreneurship; mobility ...

Education andResearch System

Professionaleducation and

training

Higher educationand research

Public sectorresearch

Industrial System

Large companies

Mature SMEs

New, technology-based firms

IntermediariesResearchinstitutesBrokers

Consumers (final demand)Producers (intermediate demand)

Demand

Banking,venture capital

IPR andinformation

Innovation andbusiness support

Standards andnorms

Infrastructure

PoliticalSystem

Government

Governance

RTD policies

2005 t@t

Source : Etzkowitz and Leydesdorff (2000).

Government Industry

Academia

Tri-literal networkTri-literal network and and Hybrid Hybrid

OrganizationOrganization

Linkages/interactionsamongst institutions in the “sphere” as

“dynamic and endless transitional processes”

THE TRIPLE HELIX MODELTHE TRIPLE HELIX MODEL

http://www.leydesdorff.net/list.htm

2005 t@t

NATIONAL AND REGIONAL INNOVATION SYSTEMS : NATIONAL AND REGIONAL INNOVATION SYSTEMS : A Perspective on Regional/Local Uniqueness, Competence,A Perspective on Regional/Local Uniqueness, Competence,

and Cross-sectoral Linkagesand Cross-sectoral Linkages

Industrial Cluster 1-A

Industrial Cluster 2-C

Industrial Cluster 3-B

Industrial Cluster 1-Z

Industrial Clusters :

Ind

ust

rial

Clu

ster

3

Ind

ust

rial

Clu

ster

1

Sector I

Sector II

Sector III

RegionC

RegionA

RIS RIS

The national Innovation System

RIS : Regional Innovation System.

2005 t@t

SOME PARADIGM SHIFTS ON INNOVATION AND POLICY IMPLICATIONS SOME PARADIGM SHIFTS ON INNOVATION AND POLICY IMPLICATIONS

Innovation policy (based on system approach) began to develop.

Innovation policy are more two-side policy considered also as a learning process developed towards the developemnt/strenthening a more adaptable innovation system.

Innovation policy was no longer the “monopoly” of the “Central” government, but “Regional” government as well.

Innovation system era (1980s – now).Note: New Growth Theory developed.

Inovation viewed in a system approach as a system of an“interactive-recursive process” (feedback loop/chain link model) of a complex and dynamic elements of creation (actors, activities such as discovery, invention, etc., and other elements), utilization, diffusion, and learning process holistically.

Policies emphasized on the demand side of technology were increasingly dominating the government attention to intervene the market (demand driven).

Technology policy and/or science and technology (S&T) policies developed, but most attentions were in a one-way perspective (one-side policy).

Demand pull era(1970s – 1980s).

Policies emphasized on the supply side of technology were dominant (supply driven).

Science/research policy were the central theme in the government interventions.

Technology policy began to develop.

Technology push era (1960s – 1970s).

Inovation as a ”linear-sequential process” (pineline linear model).

No adequate attention and efforts for special intervention (as policy issues).

Innovation has not received special attentions (prior to 1960s).

Innovation (i.e., “technological change”) as residual factors of economic growth (neoclassical models).

Main Policy ImplicationsThe EraThe View

2005 t@t

AN INNOVATION POLICY FRAMEWORK AN INNOVATION POLICY FRAMEWORK

Education Policy Knowledge and Skills Creativity Professionalism Entrepreneurship

Macroeconomic Policy Monetary Fiscal Trade

Industrial Policy Investment Taxation - Subsidy Incentives Sectoral regulations

R&D Policy Regional Policy

Industrial Progress and Development: Competitiveness, Innovative Capacity, Rate of

Diffusion, Learning, Entrepreneurial Performance

Innovation Policy

Improvement of Existing

Businesses

Investment Development

Development of New Firms

(NTBFs)

Science Policy Technology Policy