Wednesday, 25 December 2013

What the Index for Collaborative Innovation Partners Teaches (and What It Does Not)

The Patent Analytics Group on LinkedIn has brought to my attention a recent blog post by Alex Knapp, which appeared on the site. Entitled “Canada, Israel and Switzerland are America’s Top Innovation Partners”, here, the article describes the findings set out in the “U.S.-Israel Innovation Index”, which is described as measuring “bilateral research and development between the U.S. and other countries, here. The study was carried out by the U.S. Israel Science & Technology Foundation. In the words of its Executive Director, Ann Liebschutz, “We picked 16 countries that were geographically diverse, had links to US and had strong innovative tech companies.”

The study examined various parameters of cooperation in R&D, most notably government-to-government connections, pool of human capital, spending on R&D and involvement of private industry. Based on these criteria for measuring which countries are the “largest” innovation partners with the U.S., Switzerland came out number one, followed by Canada and Israel. The reasons why each of these three countries is so highly ranked appear to be unique to each country. Thus what seems to drive US-Swiss innovation collaboration is the role of the pharmaceutical industry in Switzerland. Given the cost and complexity of bringing pharmaceutical products to market, collaboration seems to have become increasingly common in the mutual interest of the pharmaceutical interest in each country. The article does not explicitly address Canada, but one can surmise that the same general dynamics that integrated the US auto industry with the auto manufacturing industry in southern Ontario provided a ready platform for various other forms of collaboration in innovation as well. To all intents and purposes, this integrated region has been one large industrial ecosystem, despite the presence of an international boundary.

As for Israel, emphasis in the piece was placed on the strength of the country’s innovative human capital, fuelled in part by the wide net of military conscription for the country’s post-high school youth. While the post, quoting Ms Liebschutz, overstates this (“The technical training that every Israeli receives in the army produces a country of capable engineers”), there is truth in the observation that clusters of young talent in certain military units, especially in the Intelligence Corps, have created an environment for world class innovation after release from military service. However, set against the country’s strength in human capital are its relatively limited domestic resources for funding substantial R&D activity. In fact, it can be argued that Israel high tech only took off in the 1990s, in part due to the public-private program known as Yozma, here, which brought overseas capital and managerial know-how to the local Israel R&D market.

The centrality of the US role of providing the funding for its innovation partnerships was recognized by Ms Liebschutz herself. As she notes:
“In a time when budgets are lean, you hear a lot about cuts and priorities in terms of where the government should put its resources. International cooperation, when done correctly, is a way to leverage those resources. Israel is good at creating international cooperation for funding. We felt this bilateral innovation index serves not just [the] US-Israel relationship, but the scientific community as a whole where it shows a good ROI on international cooperation.”
One might however ask just how far the US-Israel relationship can be generalised in pointing to valuable forms of cross-border innovation partnerships. Perhaps most notably, unlike Switzerland or Canada, the Israeli hi tech model prefers an exit (as speedy as possible) by the founders and major investors of the local innovation company, usually in favour of an overseas purchaser or investor. The upshot is that the capital brought from the US side into the partnership largely redounds to the benefit of a small number of people connected with the Israel partner and far less (if at all) to the Israel overall labour market, which seems largely unaffected in the aggregate.

Perhaps the ultimate upshot of this study is that there is no “one size fits all” approach for cross-border innovation partnerships, in general, and innovation partnerships with the US, in particular. This means that there will necessarily need to be trial and error in the process as the US seeks to find successful forms of innovation partnership with various countries. Managing this process in a fiscally responsible manner, in the face of uncertain results, poses the greatest challenge for those seeking to obtain benefit from such efforts in innovation partnerships.

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