SpringerBriefs in Economics For further volumes: http://www.springer.com/series/8876 Carol Yeh -Yun Lin Leif Edvinsson ● Jeffrey Chen Tord Beding ● National Intellectual Capital and the Financial Crisis in Brazil, Russia, India, China, Korea, and South Africa Carol Yeh-Yun Lin Leif Edvinsson Department of Business Administration Universal Networking Intellectual Capital National Chengchi University Norrtälje , Sweden Taipei , Taiwan Tord Beding Jeffrey Chen TC-Growth AB Accenture Gothenburg , Sweden Chicago , IL , USA ISSN 2191-5504 ISSN 2191-5512 (electronic) ISBN 978-1-4614-6088-6 ISBN 978-1-4614-6089-3 (eBook) DOI 10.1007/978-1-4614-6089-3 Springer New York Heidelberg Dordrecht London Library of Congress Control Number: 2012951665 © The Author(s) 2013 This work is subject to copyright. 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Printed on acid-free paper Springer is part of Springer Science+Business Media (www.springer.com) Foreword 1 The economic crisis is a consequence of many parallel factors which are all related to globalization and digitalization. My main concern, assessing this in more detail from the European perspective, is that the revolutionary global forces have not been taken early nor seriously enough by most national and regional decision makers. The Heads of European States and Governments have once again recalled the importance of fi scal consolidation, structural reform, and targeted investment to put Europe back on the path of smart, sustainable, and inclusive growth. The main question is how capable and ready are the national governments to tackling the complex and manifold issues of crises and to renewing even radically many of our public and private structures and processes. The fi rst basic requirement is that all the European Union Member States remain fully committed to taking the actions required at the national level to achieve the objectives of the Europe 2020 strategy. The second basic requirement is that the national and regional governments, as well as people, are ready for radical changes. This booklet and the other 11 booklets by the experienced authors focus on national intellectual capital and give necessary insights and facts to the readers and espe- cially for readers in-depth systemic thinking of the interrelationships of NIC and economic recovery. How should the national and regional decision makers tackle the existing knowledge of intangible capital? The focus needs to be more on the bottom-up approach stressing the developments on local and regional levels. I highlight our recent statements by the EU Committee of the Regions. The key priorities are to get more innovations out of research and to encourage mindset change towards open innovation. The political decision makers are fi nally aware that the traditional indicators cre- ated for and used in industrial production cannot be applied to a knowledge-inten- sive, turbulent, and innovativeness-based global enterprise environment. Indicators that perceive the intangible dimensions of competitiveness—knowledge capital, innovation knowledge, and anticipation of the future—have been developed around the world, but their use has not yet become established in practice. This booklet accelerates the development and the use of these indicators. v vi Foreword 1 This helps the local and regional, as well as central, governments in taking brave leaps forward on a practical level—giving greater ownership and involving all the stakeholders. This means the need of actions towards increasing the structural and relational capital of regions, both internally in communities of practice and in collaboration with others. The new generation innovation activities are socially motivated, open, and collec- tively participated, complex and global by nature. The regions need to move towards open innovation, within a human-centered vision of partnerships between public and private sector actors, with universities playing a crucial role. Regions should be encouraged to develop regional innovation platforms, which act as demand-based service centers and promote the use of international knowl- edge to implement the Europe 2020 strategy, smart specialization, and European partnerships according to the interests and needs of regions. For this to happen, we need to apply the new dynamic understanding of regional innovation ecosystems, in which companies, cities, and universities as well as other public and private sector actors (the “Triple Helix”) learn to work together in new and creative ways to fully harness their innovative potential. New innovative practices do not come about by themselves. One major potential is the use of public procurement. The renewing of the European wide rules must increase the strategic agility and activities of municipalities and other public opera- tors as creators of new solutions. Especially the execution of pre-commercial procurement should be reinforced even more in combination with open innovation to speed up the green knowledge society development, i.e., for common reusable solutions in creating the infrastructures and services modern real-world innovation ecosystems are built upon. Conditions must be created that also allow for extensive development projects which address complex societal challenges and which take the form of risk-taking consortia. One of our working instruments within the Committee of the Regions is the Europe 2020 Monitoring Platform, which broadly reviews and re fl ects the opinions and decisions on regional level all around Europe. It gives a fl avor of cultural and other socioeconomic differences inside the EU. This brings an important perspective to the intellectual capital, namely the values and attitudes needed for citizens support- ing policy makers on appropriate long-term investments and policies. Emphasizing the importance of these issues, decision makers in all countries and regions worldwide need a deep and broad understanding of the critical success factors affecting the national intellectual capital. With all the facts and frames for thinking this booklet gives a valuable insight into today’s challenges. Markku Markkula Advisor to the Aalto University Presidents Member of the EU Committee of the Regions Former Member of the Parliament of Finland Foreword 2 Financial crisis—words very much heard today. What is all this about, actually, and how to get a grip on what we experience today? The booklet gives an important insight into the factors affecting competitiveness and productivity in modern knowl- edge society. We need to see behind the obvious, and we need to have increasingly “quali fi ed guesses” as the character of the society and industry has fundamentally changed. What is very important to notice is the shift towards intangible value creation beyond the deterministic phenomena we saw very clearly in the industrial era. Cost drivers were the important ones throughout the industry. Mass production, bigger is better, and very traditional productivity factor were the mantra. However the production picture is changing. Increasingly value is created by the intangibles, often services related to the tangible components, and even totally in immaterial value creation, where perceptions and expectations determine the market value of the “extended product”. We also see rapid change in organisational forms; we see new type of entrepreneurship growing besides the traditional industry clusters; we see smart specialisation of regions and countries. This means also that there will be clearly different and complementary roles of the actors in innovation and value creation ecosystems. Large companies, small ones, even microenterprises together with the public sector are traditionally seen as the active partners in such innovation environments. The real issue in the dynamic markets is however that the end users are increasingly to be taken on board as a ctive subjects for innovation and not merely treated as objects, customers. Markets need to be shaped and created in much more dynamic way than ever before. Open inno- vation beyond cross-licensing includes the societal capital as important intangible engine for productivity growth. Innovation happens only when the offering is meeting the demand. Otherwise we can only speak about inventions or ideas. We need to have a close look at the intellectual capital and the different factors within it when we design our policy approaches. Short-term investments in process capital (infrastructures) and market capital seem to be very important for the manu- facturing base as such, but at the same time measures for longer-term intellectual capital development and ef fi ciency need to be taken. vii viii Foreword 2 Increasingly important is the s tructure and the open p rocesses related to intangible capital and knowledge pools. For sustainable long-term development both the h uman capital and the renewal capital are crucial , as they are directly related to the inno- vation capability of the region. The correlation between these factors and the GDP growth is undisputable. In knowledge-intensive industries talent is attracting talent, and the connectivity which modern ICT provides makes this talent pool fl uid across disciplines, organisations and geographical settings. It is imperative to modernise the innovation systems enabling the full dynamics needed for success in knowledge- intensive industries, beyond the traditional boundaries. Measuring performance of innovation systems becomes increasingly complex due to the mash-up of different disciplines, having new types of actors and interac- tions between them. Hence the importance of analysis of the various components of the national intellectual capital (and equally on national innovation capability) as done in this booklet cannot be underestimated when making quali fi ed guesses for operational choices to create functioning innovation ecosystems. The only predict- able in true innovation is the unpredictability and the surprises. The role of the public sector is to drive strategy and measures enabling the unpredictable, and to catalyse a fl uid, seamless and frictionless innovation system to grow, with strong interplay with the surrounding society. We need to have courage to experiment, to prototype in real-world settings, to have all stakeholders involved to fi nd and remove the friction points of innovation and to achieve sustainable innovation ecosystems for knowledge-intensive products and services. I wish you interesting reading with this mind opening report. Bror Salmelin Advisor, Innovation Systems European Commission DG CONNECT Foreword 3 The 2008 global fi nancial crisis hit the whole world with unprecedented speed, causing widespread fi nancial panic. Consumer con fi dence dropped to the lowest level since the Great Depression. Taiwan, with an export-dependent economy, was seriously impacted by the crisis and the unemployment rate hiked while household consumption levels dropped. At the onset of the fi nancial crisis, Professor Lin was the Dean of Student Affairs here at National Chengchi University in Taipei, Taiwan. She was the dean in charge of fi nancial aid and student loans and thus saw fi rsthand the direct impact the fi nancial crisis had upon our students. The crisis was so devas- tating that Professor Lin, along with the university, was compelled to launch several new initiatives to raise money and help students weather the dif fi cult times. I am very glad that she took this painful experience to heart and set herself upon the task of investigating the impact of the crisis, trying to look into the causes and consequences for policy implications, not only for Taiwan but also for an array of 48 countries. In particular, she approaches the crisis from the perspective of “national intellectual capital,” which is very important in today’s knowledge-driven economy. Taiwan is an example of a knowledge economy and has enjoyed the fame of being referred to as a “high-tech island.” Without an abundance of natural resources, Taiwan’s hardworking and highly educated population is the single most precious resource that the island has. Acknowledging the value of such human resources and intellectual capital, we established the Taiwan intellectual capital research center (TICRC) under my leadership in 2003. Ever since then, Taiwan’s government has continuously funded the university to conduct relevant research projects aimed at enhancing the intellectual capital of Taiwan. Having been thus endowed with the responsibility of nourishing future leaders in the public and private sectors, we have focused on building up our strength in innovation, entrepreneurship, and technology management-related research and education. To enhance intellectual capital research, we recently formed a joint team of professors for a four-year project in order to leverage their respective research capa- bilities. Through this project we hope to provide policy suggestions for the govern- ment by exploring the creativity, innovation, and intellectual capital at national, ix