President’s Corner

Industrial Policy’s Future

Henry Etzkowitz
President
International Triple Helix Institute
*email address protected*

 

That university-industry-government interactions are a potent force for innovation, entrepreneurship, and economic and social development, is indicated by their continual rediscovery. Most recently the organizers of a regional development event in Bath, UK on the “Golden Triangle” called attention to the promise of Triadic relationships (Roehrich, 2018). A presenter at an Industrial policy workshop, also at Bath University, depicted a “triangle” in slow developing European regions, with university, industry and government, each in their own corner, isolated and unrelated, as a negative triadic model (Sunley et al, 2018).

The Golden Triangle is conceptualized as the implementation phase of a mega-project that has already been decided upon. In this framework, university and industry take their place as elements of a delivery system. In the triangle of underdevelopment, university, industry and government are labeled as responsible for inactivity through their lack of engagement. The Golden Triangle suggests that a lateral triadic dimension is important to the realization of mega-projects, while the triangle shows that isolation of institutional spheres is an explanation for underdevelopment. Triple Helix analysis of the lateral dimension of innovation, supersedes the previously taken for granted view of innovation.

The Triple Helix model, by contrast, was extrapolated from regions where interaction among university, industry and government, not only playing their traditional roles, but going beyond them “to take the role of the other” to fill gaps and activate a regional innovation system. Whether in Boston, “Silicon Valley” or Ashland, Oregon, such bottom up and lateral Triple Helix interactions were crucial to set an innovation and entrepreneurship dynamic in motion (Etzkowitz and Zhou, 2018). Viewed at a later stage of success, the Triple Helix tends to be “invisible-ized,” with the resultant eco-system and its exponents, brought to the forefront and credited as the cause.

Government’s Oft Hidden Role

It is virtually an article of faith that US innovation and entrepreneurship is self-generated in “garages and dorm rooms” without significant government support. However, if you scratch virtually the high-tech success story, from the invention of the venture capital firm in the early postwar to the founding of Apple in the 1970’s, and Google in the 1990’s government’s involvement can typically found directly or at one remove, with no need for further regress (Etzkowitz, 1999). Let’s start with Palantir, the Palo Alto data-mining firm, founded with CIA support to meet its intelligence gathering needs.

It is no accident that Apple was founded in Silicon Valley, where years of military and government procurement policy supported the improvement of the transistor, and laid the groundwork for its morph into the integrated circuit. A previous generation of startups provided a cultural framework for the emergence of new ones, whereas Texas Instruments, the other source of the integrated circuit (IC) was virtually a one-off high-tech firm in the Texas of that era. The IC government funded “building blocks” for the PC were available to a community of electronic hobbyists, including Apple’s founders, that utilized US Energy Department funded SLAC linear accelerator’s library, in their computer building projects.

It is well known that Google’s founders met during orientation for new PhD students in Stanford’s computer science department. It is less well known that the search project that their research group was working on was funded by DARPA at several universities. Again, Silicon Valley had the infrastructure to help them translate their discovery into a firm. A key faculty member whom they went to for advice had himself been a founder of a then iconic firm and immediately saw the potential of their algorithm and invested on the spot. Such ecosystems of angels and other support structures for new firms, as well as concentrations of government funded research with potential for innovation, are becoming more widespread.

A Paradox of Success

It is a disservice to emerging regions to emphasize “the ecosystem” while denigrating and even denying the role of government in assisting the production of inventions. The ecosystem is built on a Triple Helix foundation of university, industry, government interactions. Failure to credit a key element of the Triple Helix model of innovation makes it less likely that a sustainable innovation system will be created. Conversely, recognition of government’s creative role in innovation and entrepreneurship makes it more likely that Silicon Valley will be sustained and replicated.

The Entrepreneurial University

The new element in regional innovation is the university, taking on an entrepreneurial role. What makes the university distinctive as an entrepreneur is its ability to build upon its previous missions of shaping Human Resources and the creation of new knowledge. The university is also distinctive as an entrepreneur due to the breath of its knowledge and Human Resources as a consequence of its general mission to focus on various areas of knowledge. Whereas firms are driven to specialize and focus on core competencies, universities are motivated to extend into new areas as a development strategy.

The university has the ability to shape new entrepreneurs through its educational activities and develop new objects for entrepreneurial projects through its ability to foster invention as an offshoot of its research activities as well as from recombining elements of existing knowledge. Some academic formats are traditionally structures to facilitate entrepreneurship while others have built in barriers. For example, single discipline degree programs are academic silos that inhibit students from different disciplines, with complementary skills, eg. engineering and business from encountering each other as a normal feature of academic life. On the other hand, degree programs, with a distribution requirement, requiring students to study outside of their main discipline facilitate inter-disciplinary collaboration, a stepping-stone to entrepreneurial projects.

Innovation-based Industrial Policy

The UK, with a larger number of world leading universities than any country other than the US, is moving to take advantage of this fact for its future economic development strategy as its dependence on the financial sector wanes, or is at best stagnant, as the effects of Brexit are felt. A comparison between the 1993 “Realizing our Potential” White Paper and the 2017 Industrial Policy Green Paper, suggests an emerging policy direction in the marked increase in references to university-industry-government interaction as the criteria of successful policy. Policy is less seen as a government initiative and more as an outcome of setting in motion a dynamic in which universities play an increasingly significant role through their interaction with industry, encouraged and facilitated by government. A projected increase in government funded R&D is another augur of the shift in policy direction, from supporting existing firms and industries to encouraging the creation of new firms and industries, based upon advanced research.

Making this policy work is contingent on filling the gaps in a traditional thesis of innovation, the so-called linear model, moving from research to utilization. Two gaps in this model have been the relative lack of support for translational research to move new discoveries into prototypes amenable to commercialization, and investment funds to scale-up start-ups with the potential to become large firms. The translational gap is increasingly met by government funded institutes, like Crick, Turing, and Franklin, incentivizing universities to collaborate in creating new R&D bases, Institutes, outside of the regular academic structure to perform translational research in fields with high potential. Universities, like Imperial and Oxford, are showing the way to address the scale-up gap by raising large funds that can be used to expand promising start-ups emanating from academia.

Industrial Policy’s Future

A Triple Helix based strategy of “picking winners” and filling gaps in the linear model relies more on innovation and new firm formation than traditional industrial policy, largely focused on enhancing firms in traditional industries. The so-called Industry 4.0 model, originated in Germany represents the latter perspective, relying primarily on incremental innovation, while the outlines of the new UK industrial policy is heavily weighted to the discontinuous approach. US industrial policy may be seen as an expression of both perspectives, with DARPA initiatives focusing on discontinuous innovation and the creation of new science-based technological fields like AI, while initiatives such as the Manufacturing centers program, improve the innovation capacities of existing firms. Moreover, the Trump era tax policies incentivizing large firms to bring their earnings home and utilize them for expansion, may be expected to enhance their existing business areas while also giving them additional resources to buy out start-ups and reduce the likelihood of future competitors.

The Chinese model, based upon inward technology transfer and massively subsidized learning curves for new product production, is a second mover strategy to the US model. Whether its universities can seed new intellectual paradigms without full intellectual freedom characteristic of western universities is an open question. Significant participation in western universities, during their careers, partially mitigates the constrictions of the heavily controlled Chinese academic system, while increasing their ambivalence, is a precarious compromise. Accentuating the differences between these models will help us see the policy choices more clearly, even as a messy reality produces exceptions to the rule. In any event, industrial policy is becoming an increasingly recognized and accepted policy arena, breaking sharply with neo-liberal expectation. Replacing an invisible hand with a visible one is a hallmark of contemporary industrial policy of whatever stripe.

 

References

Etzkowitz, H. (1999) Public Entrepreneur: the trajectory of United States science, technology and industrial policy. Science and Public Policy 26 (1): 53-62.
Etzkowitz, H. (2018) Brexit’s Innovation Regime: the Future of Industrial Policy and the Industrial Policy of the Future. CGR-IPR Bath Workshop, 26 April.
Etzkowitz, H and Zhou, C. 2018 Triple Helix: University-Industry-Government Innovation and Entrepreneurship. London: Routledge (2nd edition).
Roehrich, J. (2018) ‘Golden Triangle’ of business, government and university could turbocharge region’s economy’. www.supplychainlab.org/news/golden-triangle-business-government-and-university-could-turbocharge-regions-economy.
Sunley, P E, Evenhuis, R, Harris, R, Martin R and Pike A. (2018) The Changing Geography of British Manufacturing: Challenges for the Industrial Strategy. CGR-IPR Bath Workshop, 26 April.
Tomlinson, P. (2018) Back on the Agenda? Industrial Policy revisited. CGR-IPR Bath Workshop, 26 April.