Extending the Innovation Ecosystem Framework Dr. Thomas Wallner Upper Austria University of Applied Sciences, School of Business, Wehrgrabengasse 1-3, 4400 Steyr Austria
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Martin Menrad* Upper Austria University of Applied Sciences, School of Business, Wehrgrabengasse 1-3, 4400 Steyr Austria
[email protected] * Corresponding author Abstract: Most existing innovation system models include culture as a factor; but they do not see it as a variable factor or do not provide the means to influence it. The open system approach is suggested by systems theory as an organizational paradigm to meet the current competitive challenges. It can be applied on the individual level, the organizational level and on the level of the societal system. As innovativeness is a characteristic of culture, culture is a critical constituent of an innovation ecosystem. Innovativeness and culture are emerging qualities of social systems. They cannot be created, but they can be transformed by purposeful action. The principles of the open systems paradigm coincide with values attributed to an innovative culture and can serve as a guiding framework. Keywords: Innovation; Innovativeness; Innovation Ecosystem; Open systems; Culture; Values; Frames; Transformation; High Road of innovation; High Performance Work Systems
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Introduction
Innovation is still in the focus of attention when it comes to formulating policies for economic development or devise programs to recover from the recent – or still prevailing - global economic crisis (e.g. Wang 2009, 1). Many have emphasized the importance of innovation and innovativeness for competitive advantage (Nonaka and Takeuchi 1995, Schumpeter 1950, Subramanian and Nilakanta 1996). This is especially true in competitive markets (Baregheh, Rowley and Sambrook 2009), where a significant amount of revenue results from products and services no older than 5 years (Ruppel and Harrington 2000). By the same token, innovation is a critical factor in enhancing a nation‟s (- or a region‟s -) competitiveness. National governments have pursued planning in innovation policies to improve their nation‟s growth, or to stimulate a region‟s economic development. Likewise the European Commission has suggested innovation activities to be enhanced by creating an innovative and creative environment and investing in R&D activities, networking, and information technology (CEC 2009). In this context the concept of innovation ecosystems has been discussed extensively in the field in recent years, using different scopes, models and perspectives.
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Existing Models of Innovation Ecosystems
The current understanding of innovation ecosystems is characterized by a focus on institutions (Wessner 2007, xiii, Adner 2006, Nair 2007) such as companies, universities, investors, governments and their tightly enmeshed interactions. An innovation ecosystem can be described from various perspectives such as an individual player (e.g. a company) (Adner 2006), or a public body (e.g. a nation) (Wessner 2007, 68). The key questions asked are, how to design, build and operate a – in the eye of the beholder - favorable innovation ecosystem and how to measure its performance. To answer these questions often rather linear or rather deterministic approaches are adopted (e.g. Adner and Kapoor 2010, 309), although the notion of an innovation eco”system” per se contradicts suchlike. Robert Yawson came to similar results by reviewing the different models and innovation portfolios developed or being developed by different countries and organizations. The main gap identified in analyzing the various models of the National Innovation Ecosystem is the linear nature of presentation (Yawson 2009, 5, 6). The linear view entails a focus on input factors, which are supposed to influence the innovative capacity, such as R&D expenditures in general, government funding thereof respectively, costs of higher education, number of scientists employed, all of which are often correlated with output figures like economic growth, number of patent applications or “intermediate productive units” associated with one innovation each (Afonso, Monteiro, Thompson 2010, 7). However, an ecosystem is not a trivial machine, with a defined input-output ratio. This approach is not only inadequate to describe or understand the nature of an ecosystem, it may as well lead to absurd results (St-Germain 2010) or attempts to manipulate benchmarkings or rankings which are often based on input factors (e.g. Schibany 2009).
Furthermore, quantitative measurement of output always has a controlling effect, in particular, when linked to according incentives, which may have unintended, even adverse consequences. This has been researched and described for human resources management (Frey and Osterloh 1997) as well as for the academic and scientific field. For the latter, this may even have counterproductive effects in terms of innovation, as stream orientation is favored at the expense of new and more daring approaches which challenge established views (Bort and Schiller-Merkens 2010). In these linear representations, socio-cultural aspects are considered as mere contextual domains which do influence the rate and direction of innovative activity (Milbergs 2007, 11). However, they are not considered as a variable factor, interacting with and within the innovation eco system. Judy Estrin drew her model of an innovation ecosystem from observing a tidal pool (Estrin 2009). Estrin recognized that the balance and constant interaction of various actors enables the cross-pollination of ideas and facilitates innovation, just like the interaction of all the various species in a tidal pool creates a unique ecosystem. This model includes three communities (research, development, application) which are embedded in a supportive structure made up of leadership, funding, policy making, education and culture. Though presenting many examples, Judy Estrin eventually refers to the American Dream or the unique quality of the Silicon Valley, when it comes to seriously answering the pressing normative questions: What is the right policy? What is the right culture? Yawsons suggestion to employ System Dynamics to model an innovation ecosystem is promising and a step into the right direction, as it allows to include time lags, the interaction of the various factors and the building of formal computer simulations of rather complex interrelationships (Yawson 2009). However, Yawson, while acknowledging the system nature still assumes calculable cause-effect relations between means and measures.
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Introducing the Open Systems Paradigm
The approach presented in this submission has been developed as a concept for (and thus takes on the perspective) of a European economic region which has for itself decided to take the “High road of innovation”. According to exponents of this approach, Europe needs to compete by utilising its innovative potential to the full. Companies (including public sector institutions) need to reinvent their products and services on an almost continuous basis and translate the creativity, experience and tacit knowledge of employees at all levels into a shared resource for innovation (Totterdill 2008). Extensive literature research and the application of the findings to our case, showed, that the cultural aspects we attempted to include into our considerations were not covered by these models. The organizational paradigm suggested by system theory to meet the challenges of fast organizational learning, constant innovation and responsiveness to complex requirements is the multidimensional, purposeful system, or open system (Gharajedaghi 2006, St-Germain 2010). Design, the capability of a system to recreate its own future is the corresponding management approach (Gharajedaghi 2006). Likewise the social system of a nation or an economic region (and the congruent innovation ecosystem) can be seen as an open, multiminded system, where stakeholders participatively design a future they desire (Gharajedaghi 2006).
Also human beings are open systems. The common frame of reference of the open system paradigm allows for introducing some systematics. On each level, individual, organizational or governmental players act on behalf of their own future, contributing bottom up to the design process of the higher levels (e.g. as managers for companies, scientists for scientific institutions and all of them as citizens for the social system through democratic participation), while by the same token, structure – in the sense of Peter Senge (Senge 2006) – is created top down. Institutions and actors which are by and large identical in the many existing innovation ecosystem models can be matched to the different levels. E.g. entrepreneurs, intellectual capital (talent), are individuals; enterprises, research centers, universities, knowledge distribution centers are organizations; governments are acting on the level of the social system itself. What may appear trivial, has substantial consequences when it comes to designing the social system e.g. as an innovation ecosystem. Actors on each level can make different contributions and have to be addressed differently. For the purpose of this short paper we will in the following discussion focus on the aspect of culture only.
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The Role of Culture in Social Systems
Culture constitutes the principal bond among the members of a human community. Culture incorporates the beliefs, values, and attitudes of a social system. It provides the mental models we refer to, those hidden assumptions deeply anchored at the very core of our collective memory (Gharajedaghi 2006, 32). Culture with all its complexity, ambiguity and manifold potentialities stands at the center of any change process. Culture however is an indirect variable. It cannot be created, but rather emerges according to the prevailing conditions of the social system (Kruse 2004). The same is true for innovativeness. The problem with innovation Ecosystem models is that they promise innovations. What matters for business is the capability to innovate, the likelihood of producing innovative outcomes (Wang and Ahmed 2004). Innovations are not the same as innovativeness; they are the manifestation of innovativeness. Innovativeness is an emergent quality of the innovation ecosystem. By definition, an emergent quality cannot be operationalized. But we may assume, that certain conditions contribute to the likeliness that this emergence occurs. Innovativeness is linked to culture, in fact it can be considered as a cultural characteristic, as “the overall internal receptivity to new ideas and innovation that is demonstrated through individuals, teams and management, and that enables the formation of an innovative culture.” (Wang and Ahmed 2004, 305). Factors mentioned in Innovation Ecosystem models like entrepreneurship or funding do have strong cultural implications, e.g. with regards to the attitude towards risk-taking. Luoma-aho and Halonen (2010) define innovation ecosystem as a permanent or temporary system of interaction and exchange among an ecology of various actors that enables the cross-pollination of ideas and facilitates innovation. The activity or effect of
“cross-pollination”, which has already been used by Estrin in this context, is not specified much further. However, it requires communication, the willingness to share information and the receptivity to new ideas and trust. All of this has been supported by scientific research. Information circulation and communication are vital for the ecosystem to thrive (Ruppel and Harrington 2000). When trust is high, innovativeness has been reported to bloom (Ellonen, Blomqvist and Puumalainen 2008). Estrin describes the “five core values of innovation” – all of them can be considered as cultural characteristics - as questioning, risk taking, openness, patience and trust, determining the capacity for change of an individual, organization, or nation (Estrin 2009, 11, 4). Another cultural aspect I want to address here is tolerance. Much has been said about the importance of a tolerance for failure as part of an innovative culture. The same is true for a tolerance for diversity – a diversity of ideas as well as of people. According to the research of Richard Florida (2002), tolerance is one of the key characteristics of a place, the creative class is actually attracted to. "In contrast to the many techno-futurists that say the wired and wireless information age has made location and community irrelevant, the creative workers I talk with say they are vitally important. These people insist they need to live in places that offer stimulating, creative environments. Many will not even consider taking jobs in certain cities or regions." (Florida 2002, 95).
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Transforming Culture
Culture cannot be produced, but it is constantly being reproduced and it can be transformed by purposeful actions. Although social systems learn through their members, they show greater resistance to change than do their individual members (Gharajedaghi 2006, 85). Values held in a culture are tied to frames, which are mental structures that allow human beings to construct reality. Deep frames are relatively stable cognitive structures held in long-term memory that contain particular values. Information challenging these deep frames may be simply blocked out. (For an interesting example on the topic of climate change see McCright and Dunlap (2011)). Deep frames (and therefore the values embodied by them) are activated and strengthened through many aspects of our lived experience. If we manage to change these deep frames on a large scale, we change culture. Another important aspect in this context is that people‟s values tend to cluster in remarkable similar ways across cultures. Some sets of values can easily be held simultaneously while others oppose one another (Crompton 2010, 30). A brief assessment based on a model from Schwartz (2006) shows, that the values usually attributed to innovation (independent thought and action, creating, exploring; excitement, novelty, challenge in life) coincide with the principles of the open system paradigm and are opposed to those underlying the prevalent paradigm of neoclassical management theory. Finally we want to briefly explore how these findings can be applied to the development of an innovation ecosystem. For examples of purposeful actions we will focus on the systems level only, where the design of the innovation ecosystem is pursued. Players acting on this level are e.g. politics / governmental institutions, media engaged in innovation journalism, NGOs, networks and interest representations.
Politics can induce change to the educational system as to allow and enable learning processes, which are self-controlled, meaningful and exciting. Politics can introduce immigration regulations, which are attractive to foreign talent. Governmental representatives can engage in the public discussion emphasizing the importance of diversity and tolerance. Politics can introduce regulations which allow respectively encourage the implementation of forms of labour organization, which respect the individual as an open system such as high performance work systems (St-Germain 2010). Innovation journalism may contribute to constructing and sustaining a fertile culture of innovativeness by information provision, building reputation, maintaining trust and sharing ideas, thus creating and maintaining social capital (Luoma-aho and Halonen 2010). NGOs and networks such as Cliq, (www.cliqproject.eu) as well as interest representations can translate and coordinate between the stakeholders and link to similar initiatives in the outside world. Interest representations can contribute to the development of models of trade agreements which allow the implementation of new forms of labour organization, which respect the individual as an open system such as high performance work systems.
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Conclusions
The open systems model not only provides an organizational paradigm to meet the challenges companies are facing in a globalized economy. It also can serve as a frame of reference to shape actions in order to transform the culture of an innovation ecosystem. Policy makers in general and political advisors responsible for the design and implementation of regional development programs should be aware, that the cluster of cultural values associated with innovativeness is opposed to the one, which is associated with conservative attitudes or the neoclassical management paradigm. Hence strengthening the latter will weaken the innovativeness of the system, they are responsible for and eventually threaten its future competitiveness. Similar considerations may contribute as well to the assessment of an economic region with regards to strategic location decisions. There are indications that the principles of the open systems approach coincide with the characteristics of an innovative culture. Organizational Innovation managers aiming to strengthen the innovative culture of their organization should consider implementation of new forms of labour organization, which respect the individual as an open system e.g. high performance work systems.
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