Digital Innovation SEIZING POLICY OPPORTUNITIES D ig it a l In n o v a t io n S E IZ IN G P O L IC Y O P P O R T U N IT IE S Digital Innovation SEIZING POLICY OPPORTUNITIES This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of OECD member countries. This document, as well as any data and any map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Please cite this publication as: OECD (2019), Digital Innovation: Seizing Policy Opportunities, OECD Publishing, Paris. https://doi.org/10.1787/a298dc87-en ISBN 978-92-64-72305-4 (print) ISBN 978-92-64-67401-1 (pdf) The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. Photo credits: Cover © adimas/AdobeStock.com. Corrigenda to OECD publications may be found on line at: www.oecd.org/about/publishing/corrigenda.htm. © OECD 2019 You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgement of OECD as source and copyright owner is given. All requests for public or commercial use and translation rights should be submitted to [email protected]. Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at [email protected] or the Centre français d’exploitation du droit de copie (CFC) at [email protected]. FOREWORD │ 3 Foreword The report discusses the main findings of the 2017-18 OECD Digital and Open Innovation project. The project was conducted by the OECD Working Party on Innovation and Technology Policy (TIP) to help innovation policy makers identify priority areas for innovation policy action and reform, so as to promote innovation and inclusive, sustainable growth in the new digital age. In order to help inform policy, this report outlines how innovation is changed by the digital transformation, and features a comprehensive discussion on all the innovation policy domains that need adjustments. In some of these domains, particularly in the field of data access policies, the way forward is still very much in debate. Policy examples from case studies conducted in the course of the project shed light on specific best practices. The report also builds on and contributes to the OECD-wide Going Digital project (www.oecd.org/going-digital/). DIGITAL INNOVATION: SEIZING POLICY OPPORTUNITIES © OECD 2019 4 │ TABLE OF CONTENTS Table of contents Reader’s guide ....................................................................................................................................... 5 Acknowledgements ................................................................................................................................ 8 Acronyms and abbreviations .............................................................................................................. 10 Executive summary ............................................................................................................................. 13 Main findings and recommendations ................................................................................................ 15 Main findings ..................................................................................................................................... 16 Policy recommendations .................................................................................................................... 18 Chapter 1. Characterising innovation in the digital age .................................................................. 23 Introduction ........................................................................................................................................ 24 1.1. How is the digital transformation changing innovation? ............................................................ 26 1.2. What are the impacts of digital innovation on market dynamics? .............................................. 35 1.3. Conclusion .................................................................................................................................. 37 References .......................................................................................................................................... 38 Chapter 2. Impacts of the digital transformation on innovation across sectors ............................ 41 Introduction ........................................................................................................................................ 42 2.1. Current sector-specific digital technology applications .............................................................. 44 2.2. Digital technology opportunities for innovation: present and future .......................................... 46 2.3. Data needs and challenges for innovation................................................................................... 49 2.4. Digital technology adoption and diffusion trends ....................................................................... 51 2.5. Differences within sectors........................................................................................................... 54 2.6. Conclusion .................................................................................................................................. 55 Annex 2.A1. Definition of sectors covered in the report .................................................................... 56 References .......................................................................................................................................... 58 Chapter 3. How should innovation policies be adapted to the digital age? .................................... 61 Introduction ........................................................................................................................................ 62 3.1. Data access policies .................................................................................................................... 65 3.2. Policies to support innovation and entrepreneurship .................................................................. 66 3.3. Public research, education and training policies ......................................................................... 69 3.4. Policies to develop competitive, collaborative and inclusive innovation ecosystems ................ 70 3.5. Principles for innovation policies in the digital age .................................................................... 73 3.6. Conclusion .................................................................................................................................. 75 References .......................................................................................................................................... 76 Chapter 4. Policies to stimulate digital innovation’s diffusion and collaboration ......................... 79 Introduction ........................................................................................................................................ 80 4.1. Supporting digital technology adoption and diffusion ................................................................ 82 4.2. Spurring collaborative innovation ............................................................................................... 85 4.3. Conclusion .................................................................................................................................. 89 Annex 4.A1. Overview of country policy case studies ....................................................................... 90 References .......................................................................................................................................... 92 READER’S GUIDE │ 5 Reader’s guide This short report presents a synthesis of the main outcomes of the OECD TIP Working Party’s Digital and Open Innovation project (2017-18). It targets in particular policy makers, and contains the project’s main findings and policy recommendations. The report is part of a broad range of materials produced in the course of the project – including three policy papers, a number of country case studies and contributions, and four brochures summarising the discussions of each of the project workshops. In particular, the following policy papers on various aspects of digital innovation form the basis for discussions and conclusions presented in this report:  “Innovation policies in the digital age” discusses how digitalisation is transforming innovation processes and outcomes, and explores the ways in which innovation policy needs to adapt in order to respond to new challenges. The paper also discusses the economy-wide effects of digital innovation in terms of business dynamics, market structures and distribution (Guellec and Paunov, 2018). This paper expands on the issues discussed in Chapters 1 and 3.  “The impacts of digital transformation on innovation across sectors” discusses the similarities and differences in how the digital transformation affects innovation processes and outcomes in different sectors. It focuses on three sectors of economic activity: agri-food, automotive/transportation, and retail (Paunov and Planes- Satorra, 2019). This paper expands on the issues discussed in Chapter 2.  “The digital innovation policy landscape in 2019” provides an overview of policy strategies and initiatives recently adopted in a number of OECD countries to support digital transformation. Initiatives focus on i) enhancing digital technology diffusion and adoption; ii) promoting digital entrepreneurship; and iii) supporting research and innovation in key sectors/technologies (Planes-Satorra and Paunov, 2019). This paper expands on the issues discussed in Chapter 4. The report also builds on a number of country case study contributions to the TIP Working Party’s Digital and Open Innovation project. Such case studies include eight policy case studies – each focusing on a new innovation policy initiative for the digital transformation – and three sectoral case studies – exploring the impacts of digital transformation on specific sectors or firms (Tables RG1 and RG2). Additional country contributions – such as summaries of recent studies on digital technology adoption trends, and information on new initiatives related to the digital transformation – have also enriched the report. These case studies and additional contributions will be made available in a dedicated webpage. DIGITAL INNOVATION: SEIZING POLICY OPPORTUNITIES © OECD 2019 6 │ READER’S GUIDE Table RG1. Policy case study contributions General description Authors Data61 Presents the objectives, activities and mode of operation Cheryl George, Adrian Turner, (Australia) of CSIRO’s Data61, the largest digital R&D centre in Peter Leihn, Kate Powl, Sandy Australia. Plunkett and Data61 team Plattform Industrie 4.0 Analyses the role of Plattform Industrie 4.0 in connecting Rafael Boog (Austria) key players in business, researchers, society and politics Jasmina Schnobrich to shape the process of digital transformation so that it Roland Sommer benefits all players. Paul Trompisch Digital Extension Centre Explores an initiative aimed to encourage adoption of María José Bravo (Chile) digital technologies by SMEs in the agro-industry sector in the Maule region of Chile. SME 4.0 Competence Analyses how the network of SME 4.0 Competence Kerstin Röhling Centres (Germany) Centres in Germany is helping SMEs become aware of, Wolfgang Crasemann test and adopt new digital solutions for their businesses. Research-Create-Innovate Explores a policy initiative aimed at promoting research in Vasileios Gongolidis programme (Greece) digital-related technologies that are of relevance to key economic areas in Greece. Industry Platform 4 FVG Presents a public-private partnership platform created to Stefano Salvador (Italy) foster digital transformation of industrial companies and the growth of ICT companies within the country’s Friuli- Venezia Giulia region. Smart Industry Fieldlabs Explores how 10 specific Smart Industry FieldLabs support Claire Stolwijk (Netherlands) and accelerate the development, testing and Matthijs Punter implementation of smart industry solutions. Digital Catapult Centre Explores the role of Digital Catapult Centre in connecting Brian MacAulay and Digital (United Kingdom) businesses with the research and academic communities, Catapult team and in helping them commercialise innovations. Table RG2. Sectoral case study contributions General description Authors Digital start-ups and clusters Provides insights into new business models in Karina Wagner (Austria) different sectors, and explores the effect of digital Gerlinde Pöchhacker-Tröscher transformation on innovation ecosystems. Based on an online survey, it explores how young digital companies can collaborate with mature cluster companies in various industry sectors. Digital agriculture Presents an overview of the main digital technologies Marcello Donatelli (Italy) implemented in the agriculture sector, the Michele Pisante opportunities they offer, and adoption trends across actors. The AgriDigit project aims to expand knowledge in the field of smart agriculture to promote its implementation. Digitalisation of the automotive Explores the digital transformation of the automotive Johannes Kern supply chain industry supply chain, based on interviews conducted Pascal Wolff with industry experts in China and Germany. It provides insights into digital technology adoption across different supply chain actors, new collaboration trends, and the main challenges digital innovation faces in the sector. READER’S GUIDE │ 7 Four workshops were organised in connection with the project, in order to gather experts from industry, academia and government to discuss digital transformation and its impacts on innovation. Brochures summarising the valuable input from the workshop discussions have been prepared and are available at the websites of each of the events:  How to leverage the digital transformation’s potential for innovation and research? (Paris, 20 June 2018), www.innovationpolicyplatform.org/digitalinnovation  Digital health innovations (The Hague and Eindhoven, 11-13 April 2018), www.innovationpolicyplatform.org/digitalhealth  The impacts of digital transformation on innovation across sectors (London, 21-22 September 2017), www.innovationpolicyplatform.org/londonworkshop2017  Innovation and the digital economy: What role for innovation policies? (Paris, 14 June 2017), www.innovationpolicyplatform.org/digitalworkshop2017 This project was conducted jointly with the OECD TIP project on Assessing the Impacts of the Policy Mix for Knowledge Transfer. The project analyses the impact of public research institutions on innovation performance, and explores the policy instruments implemented across countries to support science-industry knowledge exchange. References Guellec, D. and C. Paunov (2018), “Innovation policies in the digital age”, OECD Science, Technology and Industry Policy Papers, No. 59, OECD Publishing, Paris. Paunov, C. and S. Planes-Satorra (2019), “The impacts of digital transformation on innovation across sectors” (working title), OECD Science, Technology and Industry Policy Papers, OECD Publishing, Paris. Planes-Satorra, S. and C. Paunov (2019), “The digital innovation policy landscape in 2019” (working title), OECD Science, Technology and Industry Policy Papers, OECD Publishing, Paris. DIGITAL INNOVATION: SEIZING POLICY OPPORTUNITIES © OECD 2019 8 │ ACKNOWLEDGEMENTS Acknowledgements This report was written under the supervision of Caroline Paunov. The principal authors were Dominique Guellec, Caroline Paunov and Sandra Planes-Satorra. Detailed feedback and suggestions from the project’s steering group, as well as from experts and delegates to the OECD Working Party on Innovation and Technology Policy (TIP) and the OECD Committee for Scientific and Technology Policy (CSTP), over the course of the project are gratefully acknowledged. Catherine Moreddu, Marie-Agnes Jouanjean, and Gwendolen Deboe from the OECD Trade and Agriculture Directorate, as well as Tom Voege from the International Transport Forum, provided valuable input on the impacts of the digital transformation on the agro-food and transportation sectors; their contributions are gratefully acknowledged. For their participation in the interviews conducted in connection with this report, the authors would like to thank Christopher Brewster from TNO, the Netherlands; Sebastian Jagsch and Maria Kollmann from AVL LIST GmbH, Austria; and Susan Helper, Professor at Case Western Reserve University, United States. Several countries contributed case studies to the project that inform this final report. The authors would like to thank Peter Leihn, Kate Powl, Chris Chelvan, Cheryl George, Adrian Turner, Sandy Plunkett and the rest of the team from Data61, CSIRO (Australia); Rafael Boog, Jasmina Schnobrich, Roland Sommer and Paul Trompisch from Plattform Industrie 4.0 (Austria); María José Bravo from the Ministry of Economy, Development and Tourism (Chile) and Alejandra Núñez, from the Chilean Economic Development Agency (CORFO, Chile); Wolfgang Crasemann, Kerstin Röhling and the rest of the team from the Ministry of Economic Affairs and Energy (Germany); Vasileios Gongolidis, from the Ministry of Education, Research and Religious Affairs (Greece); Stefano Salvador, from the Area Science Park (Italy) for the case study on Industry Platform 4 FVG; Claire Stolwijk and Matthijs Punter, from TNO, for the case study on Smart Industry Fieldlabs (the Netherlands); Brian MacAulay and the team from Digital Catapult (United Kingdom); Karina Wagner and Gerlinde Pöchhacker-Tröscher from Pöchhacker Innovation Consulting GmbH, authors of the case study on digital start-ups and clusters commissioned by the Ministry of Digital and Economic Affairs (Austria); Marcello Donatelly from the Council for Agricultural Research and Economics, and Michele Pisante, Professor at the University of Teramo, for developing the case study on the Agridigit project (Italy); and Johannes Kern and Pascal Wolff, both from Tongji University and the Technische Universität Darmstadt, for the case study on the digital transformation of the automotive supply chain, with evidence from Germany and China. The authors would also like to thank the following for valuable contributions to the project: Margherita Russo, Professor at the University of Modena and Reggio Emilia, for providing insights on the digitalisation of the automotive supply chain in Italy; Kazuyuki Motohashi, Professor at the University of Tokyo, for providing evidence on the use of big data in manufacturing in Japan; Anna Cabigiosu, from the Center for Automotive and Mobility Innovation and the Ca' Foscari University Venezia; Emanuele Brancati, from the University of Naples “Parthenope”; Raffaele Brancati and Andrea Maresca from the Italian Ministry of Economic Development; Alfonso Marino and Paolo Pariso, from the University of Campania “Luigi Vanvitelli”; Nicoletta Rangone, from LUMSA University;