Specialised skills, culture of innovation help R&D to succeed

The availability of specialised skills and a governmental commitment to promote a culture of innovation are among the key ingredients of ensuring successful research and development (R&D) clusters, according to a new Economist Intelligence Unit study. A highly specialised focus for each innovation-led cluster, an attractive business environment, and a good quality of life are also important elements to ensure the success of R&D clusters, according to the study, which was sponsored by the Advanced technology Investment Company of Abu Dhabi.

Fostering innovation-led clusters: A review of leading global practices is the second in a series of three Economist Intelligence Unit reports on research and development (R&D) in the Middle East. It focuses on new ideas and common factors in the success of cluster initiatives globally, with a bias towards those that hold relevance for the Middle East. The report draws on wide-ranging desk research, a global survey of 214 executives with knowledge of their firms’ R&D activities, and in-depth interviews with 15 international experts in innovation-led clusters.

Following are the key findings of the research:

=Government has a crucial role to play; so does the market. Although many advocate a wholly “bottom-up” approach to cluster development, it is clear that many clusters have succeeded on the back of government intervention. What is difficult to get right is the scale and type of support: a heavy hand can stifle progress, while too little intervention can lead to a lack of vital support. But while some clusters might work without government backing, none will work without market forces.

=Clusters are about collaboration, not just locating firms in the same place. Although innovation networks are increasingly globalised, nearly all experts agree that ideas flow fastest in a local community. As such, a key part of cluster development is fostering such collaboration, especially in countries where this has not been part of the local business culture. As Navi Radjou of the University of Cambridge’s Judge Business School puts it: “It’s important to take a humanistic, rather than mechanistic, approach to building clusters.”

=Talent is the single most important factor in developing successful clusters. A government’s overarching aim should be to develop a continuous supply of workers with world-class skills. Singapore’s cluster success is largely owing to its long-term efforts to develop the quality of its workforce. A related focus should be on encouraging the inward migration of talent from around the world. Attracting a star name in a given field can be a crucial catalyst.

=Governments need to work to promote a culture of innovation and entrepreneurship. This is especially vital in countries where either the state or state-owned firms are seen as the primary pathways to success. South Korea’s cluster success is in part owing to its efforts in promoting entrepreneurship as an alternative to a typical career with its local conglomerates. It is also important to create a culture that tolerates different opinions, creativity and risk-taking. “Culture matters.

This is the secret ingredient,” argues Oded Cohn, head of research at IBM Israel.

=Clusters work best when they are focused and can compete. Many successful clusters are highly specialised: Tainan Science Park in southern Taiwan, for example, developed on the back of liquid crystal technology. Bristol’s so-called ‘Silicon Gorge’ in the UK evolved around microchips. Once a specific focus emerges, governments need to identify it, and then work to remove any barriers to competition.

=Governments can do much to create an attractive business environment—and a good place to live.

Easing planning rules, tweaking the tax code, removing penalties for failure, smoothing visa and immigration processes, ensuring intellectual property (IP) protection—there is much a government can and must do to support cluster development. Some take extreme measures: Russia’s new Skolkovo cluster is developing its own legal framework, distinct from the state, to encourage its development. What shouldn’t be forgotten is the importance of also ensuring a good quality of life for prospective employees, to support efforts to attract and retain talent.

=A strong local market will help attract R&D investment, but is not crucial for global success. Some clusters, such as Israel’s, have succeeded in spite of the absence of a significant local market, as firms are forced to think globally from the outset. But from an R&D perspective, the relative sophistication of local demand is more important than the quantity.

Fostering innovation-led cluster: A review of leading global practices is available free of charge at: http://www.businessresearch.eiu.com/Innovation-led-clusters.html.