Leadership in Enabling and Industrial Technologies

Leadership in Enabling and IndustrialTechnologies Fostering an Entrepreneurial Mindset through Innovation Policy by Hosea Saputro HANDOYO (34186) A dissertation submitted in partial fulfilment of the requirements for the degree of Master of Public Policy 2014 Willy Brandt School of Public Policy University of Erfurt Dissertation Supervisor: Prof. Dr. Edgar Aragón Second Reader: Dr. Steffen Wetzstein Erfurt, July 25, 2014 Hosea Handoyo | www.hshandoyo.net i Ego hoc Deo familia et amicis Hosea Handoyo | www.hshandoyo.net ii ABSTRACT With the future growth of the global economy depending on innovation, this dissertation is set out to examine the application of innovation and technology clusters in achieving industrial leadership. By examining Regional Innovation System of Thuringia, the study elucidates the process by which innovation can strengthen regional competitiveness and the constraints it has. Two research strategies are used: a quantitative data analysis of the region and a series of interviews with the innovation stakeholders. This also includes a deeper investigation of the Ilmenau region. Data has been collected from archives, newspapers, reports, and academic publications. This dissertation challenges the argument that innovation depends primarily on government policies rather than on the most innovative and commercially-active stakeholders. While existing literatures on innovation assume all technology sectors are similar, the investigation also highlights the specific approaches of technology clusters. Drawing from the interviews and case studies, this study reveals the significance of social capital, such as personal relationship and trust-building in innovation processes. Thus, the results reinforce the importance of collaboration in innovation policy-making and the need of interdisciplinary approaches in understanding innovation by integrating politics and psychology with economics. It offers policy recommendations for the Thuringian innovation stakeholders for improving the current Regional Innovation System and Cluster approach within the EU framework of “Leadership in Enabling and Industrial Technologies”. Keywords: Regional Innovation System, Cluster, Regional Development, Competitiveness Word count: 19.226 (main body) Hosea Handoyo | www.hshandoyo.net iii KURZFASSUNG Innovation ist der kritische Faktor für das zukünftige Wachstum der Weltwirtschaft. Die vorliegende Arbeit ist daher darauf ausgerichtet die Verwendung von Innovations- und Technologie-Clustern zur Erreichung von Marktführerschaft (im Industriebereich) zu untersuchen. Durch die Untersuchung regionaler Innovationssysteme in Thüringen wird jener Prozess durchleuchtet, im Zuge dessen Innovation die regionale Wettbewerbsfähigkeit steigern kann. Außerdem werden vorliegende Rahmenbedingungen und hemmende Faktoren betrachtet. Hierfür werden zwei Forschungsstrategien angewandt: Zunächst wird eine quantitative Analyse der Region durchgeführt um dann durch eine Reihe von Interviews mit Interessensvertretern aus dem Bereich Innovation erweitert zu werden. Weiterhin ist eine tiefere Analyse der Region rund um Ilmenau enthalten. Verwendete Daten stammen aus Archiven, Zeitungen, Berichten und akademischen Publikationen. Die vorliegende Arbeit stellt die Argumentation infrage, dass Innovation hauptsächlich von Regierungsentscheidungen abhängt. Stattdessen wird der Einfluss von innovativen, regional aktiven Wirtschaftsakteuren betont. Während vorhandene Literatur oft davon ausgeht, dass sämtliche Technologiebereiche sich ähnlich sind, legt die vorliegende Untersuchung einen Fokus auf spezifische Anforderungen für die Entwicklung unterschiedlicher Technologie-Cluster. Unter Einbeziehung der durchgeführten Interviews und Fallstudien wird weiterhin die Bedeutung von Sozialkapital (z.B. persönliche Beziehungen, den Aufbau von Vertrauen) für Innovationsprozesse herausgestellt. Darauf aufbauend bekräftigen die Ergebnisse die Wichtigkeit von Kollaboration beim Erstellen von öffentlichen Innovationsstrategien und den Bedarf für interdisziplinäre Ansätze, die ein Verständnis von Innovation durch die Integration von Politik, Psychologie und Ökonomie vereinfachen. Die Arbeit gibt schlussendlich Empfehlungen für Thüringer Interessensvertreter im Bereich Innovation, die dazu dienen sollen den Ansatz für lokale Innovation und den Aufbau von Clustern unter dem EU- Rahmenprogramm "Leadership in Enabling and Industrial Technologies" zu verbessern. Stichwort: Regionales Innovationssystem, Cluster, regionale Entwicklung, Wettbewerbsfähigkeit Wortanzahl: 19.226 Hosea Handoyo | www.hshandoyo.net iv SAMENVATTING De toekomstige groei van de wereldeconomie is afhankelijk van innovatie. Dit proefschrift onderzoekt de toepassing van geclusterde innovatie en technologie in het verkrijgen van industrieel leiderschap. Door het Regionaal Innovatiesysteem van Thüringen te onderzoeken blijkt hieruit dat innovatie processen het regionale concurrentievermogen en zijn beperkingen kan versterken. Twee onderzoeksmethoden zijn hiervoor gebruikt: een kwantitatieve analyse van de regio en een reeks interviews met belanghebbende vernieuwers. Dit bevat tevens een dieper onderzoek naar de regio Ilmenau. De data zijn verzameld uit archieven, kranten, verslagen en wetenschappelijke publicaties. Dit proefschrift vecht het argument aan dat innovatie in de eerste plaats afhankelijk is van overheidsbeleid meer dan van innovatieve en commercieel actieve belanghebbenden. Terwijl de bestaande literatuur met betrekking tot innovatie aanneemt dat alle technologische sectoren vergelijkbaar zijn, benadrukt het onderzoek ook de specifieke benaderingen die nodig zijn voor verschillende technologische clusters. De interviews en casus studies in dit onderzoek tonen het belang aan van sociaal vermogen, zoals persoonlijke relaties en het opbouwen van vertrouwen bij innovatieprocessen. Samenvattend, de resultaten versterken het belang van samenwerking in het innovatiebeleid en de noodzaak van een interdisciplinaire aanpak bij het begrijpen van innovatie in het integreren van economie met politiek en psychologie. Het biedt ook een beleidsaanbeveling voor de partijen die betrokken zijn bij de Thüringer innovatie voor het verbeteren van de huidige aanpak ‘Regional Innovation System en Cluster’ binnen het EU-kader van "Leiderschap in ontsluitende en industriële technologieën“ Trefwoord: regionaal innovatiesysteem, cluster, de regionale ontwikkeling, concurrentievermogen Woorden tellen: 19.226 Hosea Handoyo | www.hshandoyo.net v ABSTRAK Dengan pertumbuhan masa depan ekonomi global bergantung pada inovasi, skirpsi ini bertujuan untuk menelaah penerapan inovasi dan kluster teknologi dalam mencapai kepemimpinan industri. Dengan memeriksa Sistem Inovasi Regional Thuringia, studi ini memaparkan proses dimana inovasi dapat memperkuat daya saing regional dan kendala yang dihadapi. Dua strategi penelitian yang digunakan adalah analisis data kuantitatif daerah dan serangkaian wawancara dengan para pemangku kepentingan inovasi. Hal ini juga diperkuat dengan penyelidikan lebih dalam di wilayah Ilmenau. Data telah dikumpulkan dari arsip, surat kabar, laporan, dan publikasi akademik. Skripsi ini menilik kembali argumen bahwa inovasi terutama tergantung pada kebijakan pemerintah. Sejatinya, inovasi bergantung ada pemangku kepentingan yang paling inovatif dan komersial. Sementara itu, literatur yang ada mengenai inovasi menganggap semua sektor teknologi serupa, skripsi ini juga menyoroti pendekatan khusus yang dibutuhkan berdasarkan sektor-sektor teknologi yang berbeda. Studi ini menunjukkan pentingnya modal sosial, seperti hubungan pribadi dan kepercayaan dalam proses inovasi. Dengan demikian, pembuatan kebijakan inovasi dan diperlukan pendekatan interdisipliner dengan mengintegrasikan politik dan psikologi dengan ekonomi. Skripsi ini diakhiri dengan menawarkan rekomendasi kebijakan untuk para pemangku kepentingan inovasi dengan stakeholder Thuringian dalam meningkatkan arus Sistem Inovasi Daerah dan Cluster pendekatan dalam kerangka Uni Eropa "Leadership in Enabling and Industrial Technologies". Kata kunci: sistem inovasi regional, kluster, pembangunan daerah, daya saing Jumlah kata: 19.226 Hosea Handoyo | www.hshandoyo.net vi ACKNOWLEDGEMENT ‘No duty is more urgent than that of returning thanks’ Aurelius Ambrosius (337-397) When my grandparents † asked me to pursue higher education, I asked them how far I should study, and they said, ‘as high as the heavens!’ It is clear that climbing the ‘stairs to the heavens’ is not a work of solitary achievements. I am completely at loss when it comes to acknowledging people who have helped me in completing this study. First of all, I wish to express my gratitude to my academic supervisors; Dr. Edgar Aragón for sharing his knowledge, experience, and the probing questions during regular meetings. Also, to Prof. Florian Hoffmann for the encouraging support without which I would have not completed this journey – and this includes the Dr. Steffen Wetzstein for his support and inspiring comments. This also includes encouragements from the Indonesia State Ministry of Research and Technology, past-minister Mr. Koesmayanto Kadiman and Mrs. Lies Widjayanti who have introduced me to public policy and innovation system. My deepest gratitude is also due to members of Willy Brandt School and all the MPP family. The research project has tremendous supports from all the experts and practitioners whom I have interviewed and discussed with. I would also like to convey my thanks to University of Erfurt, Thuringia Ministry of Economics, and TU Ilmenau. I thank Prof. Dr. - Ing. Günther Schäfer, Dr. Dörte Gerhardt, and Sven Müller who helped opening the door to TU Ilmenau and the companies in Ilmenau. I am also grateful for the constructive inputs from Dr. Sandy Neish, Dr. Deborah Spencer, MBA., Dr. Patrick McCarthy, Dr. Kevin Parker, and Dr. Fred van Eenennaam. In this occasion, I would also thank many people who have played great deal in during the past several years in shaping my life through the completion of this perplexing journey with their mentoring supports, especially Bob Foster, Johnson Sinaga, Michael Putrawenas, Nico † and Marie Mandersloot, Daisy Prasetya, and Ton Ammerlaan. On personal level, I would like to express my deepest gratitude to my beloved families; for their understanding, support, and endless love through the duration of my studies. While from my ‘social life’, I can never thank these people enough for being ‘the shoulders to cry on and ears that will listen’ and tirelessly reminding me to have a more Hosea Handoyo | www.hshandoyo.net vii balanced life in the past 2 years in Erfurt: Robert A Jonker, Thomas Weise, Tobias Schönau, Martin Ostermann, Cindy Carina Affandi, Nonni Athari, and Jens Busse. Then to some of my friend with whom I have a load of meaningful discussions and collaborations, Ulrike Wollenhaupt-Schmidt, Tineke Tiebosch, Theresa Hermann, Maria Sheviakova, Adriana Henriquez, Lukas Richter, Nastia Sabatkovskaya, Audrey Clarissa, and to Maria Ehrich and her family. I also wish to thank people from my ‘Doppelkopf’ group: Daniel Bormke, Sascha Uthe, Karsten Schönfeld, Dr. Christian Scheibenhof, Ingo Schönemann, and Saskia Hippe for demonstrating what friends are for. I also cannot leave this without mentioning the distinguished delegates of Erfurt Model United Nations, both ‘orga’ and delegates in 2013 and 2014, particularly Florian Emmerich, Florian Hader, Nora Henscke, Peter Tscherny, and Sarah Duryea who have shown great friendships and professionalisms. Despite my effort to properly acknowledge everyone involves in this ‘journey’, I apologize to those I forgot to mention here. I can only assure you that it was unintentional. Oremus pro invicem, Hosea Handoyo Hosea Handoyo | www.hshandoyo.net viii TABLE OF CONTENTS ABSTRACT (English) .................................................................................................... ii KURZFASSUNG (German) .......................................................................................... iii SAMENVATTING (Dutch) ............................................................................................. iv ABSTRAK (Indonesian) ................................................................................................ v ACKNOWLEDGEMENT ................................................................................................ vi TABLE OF CONTENTS .............................................................................................. viii LIST OF TABLES ......................................................................................................... xi LIST OF FIGURES ....................................................................................................... xii LIST OF ABBREVIATIONS ........................................................................................ xiii Chapter 1 Introduction ............................................................................................ 1 1.1 Global Context .................................................................................................. 1 1.2 Regional Context .............................................................................................. 2 1.3 Aim ................................................................................................................... 4 1.4 Theoretical Framework ..................................................................................... 4 1.5 Methodology ..................................................................................................... 5 Case Study: Thuringia and Ilmenau University of Technology ........................... 6 1.6 Personal Motivation .......................................................................................... 6 1.7 Structure of Thesis ............................................................................................ 7 Chapter 2 Theoretical Framework .......................................................................... 8 2.1 What is technology innovation? ......................................................................... 8 2.2 Technology Level Readiness (TLR) .................................................................. 9 2.3 How does innovation play a role in Industrial Leaderships? ............................ 11 2.4 OECD Innovation System Approach ............................................................... 12 2.5 National Innovation Systems ........................................................................... 14 2.6 Regional Innovation System ............................................................................ 17 2.7 Cluster, Innovation, and Entrepreneurship ...................................................... 18 2.8 N-Helix Model ................................................................................................. 19 2.8.1 Triple Helix Innovation Model ...................................................................... 21 2.8.2 Quintuple Helix ............................................................................................ 22 2.9 Summary ........................................................................................................ 23 Hosea Handoyo | www.hshandoyo.net ix Chapter 3 Methodology ......................................................................................... 25 3.1 Timeline, Funding, and Language ................................................................... 25 3.2 Conceptual framework of innovation and industrial leadership ........................ 25 3.3 Primary Data Collection: in-depth interviews and discussions ......................... 27 3.4 Secondary Data Collection .............................................................................. 30 3.5 Challenges and Limitations ............................................................................. 30 Chapter 4 Innovation in Thuringia: Moving Forward and Unlocking its Potentials 31 4.1 Cluster Approach in Thuringia ......................................................................... 31 4.2 Evaluation of Cluster Approach ....................................................................... 34 4.3 Regional Innovation System in Thuringia ........................................................ 35 4.4 Innovation Stakeholders: Quintuple Helix in Thuringia .................................... 39 4.4.1 Government ............................................................................................ 39 4.4.2 Academia ................................................................................................ 42 4.4.3 Business .................................................................................................. 42 4.4.4 Civil Societies .......................................................................................... 44 4.4.5 Media ...................................................................................................... 45 Chapter 5 Innovation in Thuringia under Microscope ......................................... 46 5.1 TU Ilmenau ..................................................................................................... 46 5.2 Fostering Entrepeneurship in TU Ilmenau: Auftakt ......................................... 48 5.3 Assessing Regional Innovation System in Thuringia ....................................... 49 Chapter 6 Where Theory Meets Practice .............................................................. 53 6.1 Can Cluster Approach and Regional Innovation System stimulate innovation and achieve industrial leadership? .................................................................. 53 6.2 Where does leadership in enabling and industrial technologies reside? .......... 54 6.3 What is the most important factor to sustain LEIT? ......................................... 55 6.4 What are the best indicators for achieving LEIT? ............................................ 58 6.5 Impact and its Possible Implementation in Developing Countries .................... 60 6.6 Outlook and Future Research ......................................................................... 61 Conclusion .................................................................................................................. 62 Hosea Handoyo | www.hshandoyo.net x Chapter 7 Policy Recommendations .................................................................... 66 I. Thuringian Ministry of Economics, Labor, and Technology ............................. 67 II. Thuringian Ministry of Education, Science, and Culture ................................. 67 III. Technology University Ilmenau ....................................................................... 68 IV. Small and Medium Enterprises (and Start-ups) in Knowledge Enabling Technologies .................................................................................................. 68 V. European Commission DG Research and Enterprise...................................... 68 REFERENCES ............................................................................................................. 69 ANNEX 1 Overview of Different Technologies ........................................................ 80 ANNEX 2 Location of Thuringia in Germany ........................................................... 81 ANNEX 3 Location of major innovation cities in Thuringia .................................... 82 ANNEX 4 Geographical Situation of Ilmenau .......................................................... 83 ANNEX 5 OECD Systemic Approach Publications ................................................. 84 ANNEX 6 OECD National Innovation Systems ........................................................ 85 ANNEX 7 Guiding Questions for Interview .............................................................. 86 ANNEX 8 INTERVIEWS AND SELECTED QUOTES ................................................ 88 ANNEX 9 Overview of ThEx ................................................................................... 100 ANNEX 10 Locations of Commercial Research Institutes in Thuringia ................. 101 Declaration (Erklärung) ............................................................................................ 102 Hosea Handoyo | www.hshandoyo.net xi LIST OF TABLES Table 1 General Profile and Economic Performance of Thuringia .............................. 3 Table 2 Different National Innovation System (NIS) definitions by the primary principal investigators of NIS ................................................................................. 14 Table 3 List of experts/scholars in innovation and industrial leadership ................... 26 Table 4 List of experts/scholars in innovation and industrial leadership ................... 29 Table 5 Overview of Thuringian Clusters ................................................................. 33 Table 6 Contribution of Knowledge Enabling Technology to Thuringia's Economy... 37 Table 7 Quintuple Helix Stakeholders in Thuringian Innovation System ................... 40 Table 8 R&D Excellence in Thuringia ....................................................................... 43 Table 9 Commercial Research Institutes in Thuringia .............................................. 45 Table 10 Research Funding in TU Ilmenau ................................................................ 47 Table 11 Regional Distribution of Entrepreneurial Activity in Thuringia ...................... 48 Table 12 Assets and Liabilities of Innovation in Thuringia .......................................... 50 Hosea Handoyo | www.hshandoyo.net xii LIST OF FIGURES Figure 1 Technology Level Readiness (TLR) Scheme .......................................... 10 Figure 2 TLR and Industrial Leaderships............................................................... 12 Figure 3 Innovation in Statist Model ....................................................................... 13 Figure 4 National Innovation System Schematic Representative .......................... 15 Figure 5 Learning Regions and Learning Flows in Regional Innovation Systems .. 16 Figure 6 Regional Innovation Systems in Europe .................................................. 17 Figure 7 Porter's Diamond for Cluster Analysis (Porter, 1990) ............................... 19 Figure 8 Technological Entrepreneurship and its Complexities .............................. 20 Figure 9 Schematic representation of Triple Helix ................................................. 21 Figure 10 Schematic Representation of Quintuple Helix .......................................... 23 Figure 11 Flow chart of the methodology used in this study .................................... 28 Figure 12 Structure of Thuringia Cluster Management (TMWAT, 2012) .................. 33 Figure 13 Diamond Model: Government Role in Upgrading Cluster in Thuringia ..... 36 Figure 14 Diamond Model: Private Sectors Influences on Cluster Upgrading .......... 36 Figure 15 RIS 3 Strategies (modified from TMWAT (2014, p. 7)) ............................. 38 Figure 16 Pillars of RIS3 to achieve its Vision ......................................................... 39 Figure 17 Innovation Process in the Head ............................................................... 57 Figure 18 Processes of Innovation .......................................................................... 57 Hosea Handoyo | www.hshandoyo.net xiii LIST OF ABBREVIATIONS BMBF Federal Ministry of Education and Research (Bundesministerium für Bildung und Forschung) BMWi Federal Ministry of Economics and Energy (Bundesminiterium für Wirtschafts und Energie) BRD Federal Republic of Germany (Bundesrepublik Deutschland) DDR German Democratic Republic (Deutsche Demokratische Republik) DevCo Development and Cooperation DFG German Research Foundation (Deutsche Forschungsgemeinschaft) DG Director General e.V. Registered Association (eingetragener Verein) EC European Commission EP European Parliament EU European Union EUR Euro (€) EXIST University-Based Business Start-Ups (Existengründungen aus der Wissenschaft) FDI Foreign Direct Investment FH University of Applied Sciences (Fachhochschule) FI Fraunhofer Institute FTVT Thuringian Research and Technology Association (Forschungs- und Technologieverbund Thüringen e.V.) GDP Gross Domestic Products GIZ German Federal Enterprise for International Cooperation (Deutsche Gesellschaft für Internationale Zusammenarbeit) GmbH Company with Limited Liability (Gesellschaft mit beschränkter Haftung) GNP Gross National Products GVA Gross Value Added H2020 Horizon 2020 HEI Higher Education Institution HGN Higher Education Start-ups Network (Hochschul Gründer Netzwerk) ICT Information and Communication Technology IHK Chamber of Commerce ( Industrie- und Handelskammer) IP Intellectual Properties IPO Initial Public Offering KET Knowledge Enabling Technology KTP Knowledge Transfer Process LEED Local Economic and Employment Development LEG State Development Corporation of Thuringia (Landesentwicklungsgesselschafts Thüringen) LEIT Leadership in Enabling and Industrial Technologies MPI Max Planck Institute Hosea Handoyo | www.hshandoyo.net ii NIS National Innovation System OECD Organization for Economic Co-operation and Development PO Patent Office R&D Research and Development RI Research Institutes RIS Regional Innovation System RIS3 Regional Research and Innovation Strategy for Intelligent Specialisation of Thuringia (Regionale Forschungs- und Innovationsstrategie für intelligente Spezialisierung für Thüringen) SME Small and Medium Enterprises STIFT Foundation of Technology, Inovation, and Research (Stiftung für Technologie, Innovation und Forschung Thüringen) SWOT Strength, Weakness, Opportunities, and Threat TAB Development Bank of Thuringia (Thuringer Aufbau Bank) TH Thuringian Higher Education (Thüringer Hochschule) TH Thuringia (Thüringen) TH Technical College (Technische Hochschule) ThAFF Thuringian Agency for Skilled Personnel Marketing (Thüringer Agentur Für Fachkräftegewinnung) ThCM Thuringia Cluster Management (Thüringer Cluster Management) ThEx Thuringian Center for Start-ups and Entrepreneurship (Thüringer Zentrum für Existenzgründungen und Unternehmertum) ThüBAN Thuringia Business Angel Network ThürING Thuringian Network of Innovative Start-ups ( Thüringer Netzwerk für Innovative Gründungen) TMBWK Thuringian Ministry of Education, Science, and Culture (Thüringer Ministerium für Bildung, Wissenschaft, und Kultur) TMWAT Thuringian Ministry of Economics, Labor, and Technology (Thüringer Ministerium für Wirtschaft, Arbeit, und Technologie) TT Technology Transfer TTD Technology Transfer and Development TTO Technology Transfer Office TU Technical University/University of Technology (Technische Universität) TUI Technical University of Ilmenau UNIDO United Nations USD United States Dollar ($) VC Venture Capital WB World Bank WIN Growth, Innovation, Resources (Wachstum, Innovation, Nachhaltigkeit) WIR Business, Innovation, and Resources (Wirtschaft, Innovation, Ressourcen) Hosea Handoyo | www.hshandoyo.net 1 Chapter 1 Introduction This chapter provides the overview of the thesis and presents the reasoning behind the study. Started by outlining the global and regional relevance, this study attempts to clarify differing viewpoints on the context of innovation policy with its own limitations. This chapter is closed by disclosing the structure and logic of the thesis. 1.1 Global Context The shape and potential of worldwide industries in the next 5-10 years are yet unknown. Technological advances are rapidly growing and technological innovations are becoming the key priorities of emerging economies to shift to knowledge economy. Europe identifies Knowledge Enabling Technologies (KET) as the future key competences of Europe. KET is a set of technologies which complement and improve the current technologies. For example, nanoelectronics allow computer chips to be much smaller and more powerful. This helps to improve the current quality computer industry and medical devices. Thus, these industrial sectors could be the leaders in their industrial sector. Becoming the global player and the best technology is also known as achieving Leadership in Enabling and Industrial Technologies or LEIT (European Commission, 2013b). European Union has suggested that LEIT is one of the answers to global economic crises and increase Europe’s regional competitiveness in knowledge economy (EC Decision C (2013) 8631). KETs comprise six strategic technologies: nanotechnologies, micro- and nano-electronics - including semiconductors, photonics, advanced materials, biotechnologies, and advanced manufacturing systems with Information and Communication Technologies (ICTs) (See annex 1 for explanation of different technologies). These technologies cannot stand alone to give added-values but they have to be combined together. Hence, KETs are knowledge- and capital intensive with high potentials to address the current and future general public challenges (EC Comm. (2009) 512). Industrial leadership depends on fostering innovative knowledge production from basic and applied research from higher education institutions (HEIs). Boosting KETs is not enough on funding scientific research but also transforming HEIs into entrepreneurial ones with strong technology transfer activities. Hence, I propose that Leadership in Enabling and Industrial Technologies can only be achieved if government has a strong Hosea Handoyo | www.hshandoyo.net 2 commitment in the implementation of Regional Innovation System and Cluster Approach. Thus, the key stakeholder in driving innovation should be government. Europe’s competitive advantage has been challenged by intense competition both from private sectors and incentives from many emerging economies. With the economic crises and market distortion, Europe is not always able to match and attract investments in innovation of KETs. As a response, European Commission introduced its recent EU Framework for Research and Innovation “Horizon 2020” with funding mounting up to €80 billion for 2014-2020 1 . Unlike typical research funding programs, Horizon 2020 focuses not just on scientific excellence in KETs, but also on industrial leadership, and potentials to strengthen current industrial leadership and stimulate open innovations in local, regional, national, and international levels (EC Comm. (2012) 341). Thus, it brings science from lab bench, to board room, and to the market through entrepreneurship and the growth of SMEs in Europe. 1.2 Regional Context Thuringia, as one of the Federal States of Germany, is unique on its position (see Annex 2 and 3 for the maps). As part of a strong German economy, it is still considered newly developing state – labelled as part of ‘New States” from East German2. The State itself has undergone major restructuration following the German reunification with The West States under Federal Republic of Germany3 which resulted in many company closures due to efficiency with much better equipped West German companies (TMWAT, 2011, pp. 3, 6). Currently, the economic growth is about 3.1% with 40 industry operations for every 100.0000 inhabitants which means that the economic prospect is high (see Table 1.1 for more details). In comparison with other industrial States, Thuringia is doing better than Bavaria or Saxony (TMWAT, 2013b, p. 1). 1 Horizon 2020 is the financial instrument implementing the Innovation Union, a Europe 2020 flagship initiative aimed at securing Europe's global competitiveness. Further information please visit http://ec.europa.eu/programmes/horizon2020/ 2 After German Reunification ‘Die Wende’, five new states were re-established Brandenburg, Mecklenburg-Vorpommern, Saxony, Saxony-Anhalt and Thuringia. 3 Also known as Bundesrepublik Deutschland (BRD) Hosea Handoyo | www.hshandoyo.net 3 Table 1 General Profile and Economic Performance of Thuringia 2012 Values Area 16.172km 2 Population 2.229.000 Population density 138 people/km² Working population 1.015.800 GDP nominal 49,9 Mio. EUR GDP per employed person 48.773 EUR GDP per inhabitant 22.252 EUR Gross Value Added 44,7 Mio. EUR Exports 31,5 % (Source: Thuringia Statistics Office, retrieved on 1 July 2014) Now, its economy depends on manufacturing industry as the main growth engine. Since the unification and economic reconstruction in ex- East German regions, Thuringian manufacture has quadrupled its added value and made Thuringia as one of the highest economic performance compared to the average of the new German States with an export volume of 31.5% (German average export volume: 46.1%, new German States average: 34.1%) (Germany Trade & Invest, 2014). United Kingdom maintains to be Thuringia’s main trade partner with more than 1 billion Euros worth of exports. France and Italy come second and third. Automobiles (Opel – Eisenach) and automotive parts, plastics, metals are highly demanded products from Thuringia. However, highest export rates are from medicine technology, toys, and pharmaceutics with more than 40% quota (TMWAT, 2011, p. 22, 2013b, p. 8). Thuringia has various innovation products the world has forgotten, both past and present from high quality metal casting for bells and metallurgy, weapons, printing, medical devices, and optics. Now, Thuringia’s highest export rates are from Knowledge Enabling Technologies (KETs) such as precision technology (advanced manufacturing), medical technology (micro- and nanoelectronics), and pharmaceuticals (biotechnology) with more than 40% quota (TMWAT, 2012). Its international innovation products are evident from the photodiodes for Mars explorer “Curiosity”, optics and precision technology from Hosea Handoyo | www.hshandoyo.net 4 Schott in Jena, and MP3 codes that revolutionized the music industry (Heimpold, 2011; TMWAT, 2012). Thuringia’s entrepreneurship and start-up agencies are funded by European Structural Funds (ESF and ERDF), with these financing getting less every year Thuringia has to come up with a new strategy, an effective policy with sustainable funding (Heimpold, 2011; TMWAT, 2012). Despite having more than 20 research institutes and biggest German commercial research institute ‘Innovent’, Thuringia has the lowest innovation rate (25 patents/100.000 population compared to German national average of 57 patents/100.000 population) (TMWAT, 2011, 2013b). Thus, there is a strong urgency to address improve the innovation climate in Thuringia. The question is how to unlock the potentials further? (Interview X) 1.3 Aim The aim of this research project is “to evaluate the regional innovation system in Thuringia in the context of Horizon 2020 Strategy, by assessing the current policy and its possible future development”. Identification of the main stakeholders involved and innovation strategies will be of the key focus of this project.. There are many factors that emphasize the important of innovation in knowledge economy with focus on answering one fundamental question: What explains innovation-based industrial leadership at regional level? 1.4 Theoretical Framework There are two main theoretical frameworks being used in this study. Firstly, it is Regional Innovation System (RIS). The approach focusses on the relevant processes in technology transfers. This covers R&D policy, regional development, regulatory framework, local culture, and network access to expertise. Thus, the focus of innovation policies depends on how government as the key regulator puts together all the processes as part of a regional 4 development. (B. T. Asheim, Smith, & Oughton, 2011; Doloreux & Parto, 2005a). 4 The term ‘regional’ in many cases has been disputed due to its ambiguity (B. T. Asheim, Smith, & Oughton, 2011, p. 11). Most scholars agree that regional means cross-borders. In the case of Thuringia, it means within Thuringia and its surrounding region (TMWAT, 2011). Hosea Handoyo | www.hshandoyo.net 5 Within this RIS, I also introduce the implementation of Porter’s Diamond in Cluster Approach. Michael Porter’s Diamond provides the guiding principles to analyse and identify the key competitive advantage of a region which can be exploited. This helps in understanding which innovation process should be prioritized (Ketels, Lindqvist, & Sölvell, 2006). It simplifies the analysis by placing national competitiveness through four main factors that are interconnected: (input/production) factor conditions, (market) demand conditions, related and supporting industries (that could benefit main economic activities), and firm strategy, structure and rivalry (market competitions) (Porter, 2008). The second approach is by focussing on the stakeholders. KETs innovation evolves from a simple linear model, which relies on university as the sole knowledge source, to multi-stakeholders process. This framework is also called as Quintuple Helix Model (Leydesdorff, 2012). Rather than focussing on the processes, this framework puts the focus on the innovation stakeholders. It argues that success innovation depends on the synergy between academia, business, government, civil societies and press, and environment (or its entrepreneurial climate). Quintuple Helix, or the ‘Five-Helix Model’, advocates that two extra ‘helices’, media/civil societies and (natural) environments, as drivers to innovation in globalisation, aside from the regular ‘Triad’ (academia, business, and government). Civil societies through media and culture-based public are needed in identifying and sustaining the social capital while at the same time providing the support to the core stakeholders. Environmental factors are also crucial putting innovation into the right perspective, for example in green energy innovation as a response to global warming (Elias G. Carayannis, Barth, & Campbell, 2012a). 1.5 Methodology With Regional Innovation System and Quintuple Helix as main analysis frameworks, this study uses Thuringia as the main case study and in particular one of Thuringia’s innovation hub, Ilmenau. To delve further in this topic, a series of interviews with the local Ilmenau innovation stakeholders will be conducted as the source for primary data. Secondary data will be collected through vast array of written resources, such as academic literatures, reports, studies, press releases, news articles, magazine articles, websites of companies/governments, published statistics, a promotional materials, and industry/trade journals. The main working language will be in English and German. Hosea Handoyo | www.hshandoyo.net 6 Case Study: Thuringia and Ilmenau University of Technology As one of the most important science centres in Thuringia, Ilmenau University of Technology (TU Ilmenau) has been recognized by EU commission as one of the rising stars in innovation of KETs in Thuringia as stated by Dr. Peter Härtwich, European Commission DG Research and Innovation (personal communication, 11 February 2014) with and high growth of start-ups in Thuringia (Michael Fritsch, Erbe, Noseleit, & Schröter, 2009; Michael Fritsch, Noseleit, Slavtchev, & Wyrwich, 2010; Lautenschläger & Haase, 2005). The recent OECD report on Local Economic and Employment Development (LEED) also highlights TU Ilmenau success in fostering entrepreneurship and their contribution to regional economy (Hofer, Potter, Redford, & Stolt, 2013). Another unique aspect of TU Ilmenau is its location which is rather isolated from other major cities in Thuringia, such as Erfurt, Weimar, and Jena and surrounded by mountains (see Annex 3 and 4 for the map). TU Ilmenau success in innovation makes it more attractive to be studied. Unlike Friedrich Schiller University in Jena which has its own advantages from Max-Planck Institutes and other prominent research institution and by spill-over effects from many established technology companies (Cantner & Graf, 2006). Furthermore, TU Ilmenau is the main driver of regional economy under Ilmenau Technological Development Area which puts Ilmenau as perfect candidate for Regional Innovation Systems model, which emphasizes the importance of entrepreneurial university in knowledge economy (Cooke, 2004, 2008) through an effective implementation of entrepreneurship programs (Hofer et al., 2013). 1.6 Personal Motivation During my biomedical research experience in the Netherlands and the United Kingdom, I had the chance to explore ‘the other side’ of science through public debates, ethic course, and entrepreneurship trainings. These sparked my subsequent interest in technology and innovation policy. In 2008, past Minister of Research and Technology of Republic of Indonesia, Mr. Kusmayanto Kadiman, introduced me to the concept of ABG (Triplex Helix: Academia, Business, and Government). Hoping that I could contribute something positive to the innovation system in Indonesia or any other developing countries, he encourages me to take a step forward by studying public policy. Thuringia opens many opportunities in which I have the chance to get the support from TU Ilmenau to delve into innovation strategy and ways to foster entrepreneurial mindset. Hosea Handoyo | www.hshandoyo.net 7 Furthermore, with the introduction of KET, LEIT, and Horizon 2020, this creates a suitable situation to expand my current knowledge and to contribute concretely within actual EU framework. These circumstances make the case study special and worth to learn from it, particularly with the limited time and scope of the thesis itself. 1.7 Structure of Thesis The structure of the thesis is written in three major parts. The first part, consisting of the first two chapters (chapters II and II), describes the methodology for the empirical data and theoretical framework. Chapter II expands further Section 1.4 in detail about the interview methods and the reasoning for interviewees’ selection. Chapter III present the evolution of innovation theory from early 1960s to recent one – further explaining Section 1.3. It will cover Regional Innovation System, Quintuple Helix, and Michael Porter’s Diamond Model. This chapter also expounds on technology literature and its commercialization by drawing into the latest European Union measurement of technology commercialization ‘Technology Level Readiness’ (TLR scales) for KETs. TLR determines the readiness of an innovation product to be marketed. These theoretical frameworks from Chapter II are the main guidelines for data presentation and analysis in the second part of the thesis. The second part of the thesis covers the results and discussion. It is split into two chapters. Chapter IV and V describe the recent KETs innovation policy and knowledge management in Thuringia and TU Ilmenau strategy vis a vis with European Union Horizon 2020 strategy. Furthermore, it also provides the stakeholders analysis of policy making and innovation drivers. Chapter V gives answers to research questions by discussing and contrasting theory and practice. The final part summarizes the thesis by a concluding chapter with a future outlook and policy memorandum for TU Ilmenau, Thuringian Ministry of Economics, Labor, and Technology (TMWAT), Thuringian Ministry of Education, Science, and Culture (TMBWK), SMEs, and other relevant stakeholders. Hosea Handoyo | www.hshandoyo.net 8 Chapter 2 Theoretical Framework According to Porter, the economic performance of regions is strongly influenced by the vitality and plurality of innovation (Porter, 2003). In the context of high technology, such as in Knowledge Enabling Technologies (KET), innovation does not follow standard innovation model pathway (Crescenzi & Rodríguez-Pose, 2011, p. 17; Korres, Tsobanoglou, & Kokkinou, 2011). This chapter will first illustrate the complexity of technology innovation and how the innovation has been studied from early 1950 in ‘Linear Model’, System Approach ‘National Innovation System’ and ‘Regional Innovation System’ (Philip Cooke et al., 2011; B. Lundvall, 2007) to the latest innovation framework ‘Quintuple Helix’ together (Leydesdorff, 2012) with Cluster approach (Porter, 2008). 2. 1 What is technology innovation? There is a general misconception made by many policy makers and even scientists consider that both technology and innovation are the same (Allan, 2014). Technology and innovations are two different concepts all together. Technology refers to the application of basic knowledge or know-how, while innovation is new insight, novelty, or improvement that changes the current technology (Jain, Triandis, & Weick, 2010). A light bulb is light technology that involves the application of physics law, but innovation arrives when scientists develop LED light bulbs that could use less energy. Technological innovation speaks about the process of finding the new applications of knowledge coming from (basic) research that can address societal challenges (Burgelman & Maidique, 2004, p. 4; EIT, 2014). Technological innovation 5 process begins with series scientific experiments that involve various trials and errors, and result in inventions or discoveries, such as light bulbs (Edison, 1880; Hargadon & Douglas, 2001), cars, smart phones, to the latest mechatronics or robotics (Allan, 2014; Palli, Pirozzi, Natale, De Maria, & Melchiorri, 2013). Nonetheless, innovation could also come from completely unintended (or accidental) discoveries, for example in the case of antibiotic penicillin (Fleming, 1944; Kardos & Demain, 2011), sweetener Aspartame (Mazur, 1976; Stegink, 1984, pp. 3–5), household appliance microwave (L, 1953; Osepchuk, 2009), X-Ray ‘Roentgen’ medical 5 Technological innovation will be referred as simply innovation in this dissertation. Hosea Handoyo | www.hshandoyo.net 9 instrument (Haase, Landwehr, & Umbach, 1997, p. 81; Röntgen, 1898), and heart pacemaker (Casas, De Gortari, & Santos, 2000; Greatbatch, 1962). Furthermore, innovation itself can be classified into two different categories: incremental and radical innovations. Incremental innovations refer to process of adaptation, refinement, adjustment, and/or enhancement of existing technologies (Ali, 1994; Andries & De Winne, 2013; Dewar & Dutton, 1986; Ettlie, Bridges, & O’Keefe, 1984). These can be seen in the case of computer processor that works faster with the improvements of micro- and nano-chips (III, 2014; Toshihiro Hanawa, 2009) or medicines with less side effects and higher efficacy by modifying the chemical formulas (Ooms, 2000; Wang & Lipsitch, 2006). On the other hand, innovations that introduce new products or revolutionize certain technologies are considered radical innovations (Burgelman & Maidique, 2004, p. 4; Dewar & Dutton, 1986; Ettlie et al., 1984). The abandonment of telegrams in favor of telephones was one of the most obvious examples of radical innovations. 2.2 Technology Level Readiness (TLR) To achieve both incremental and radical innovations, we need scientific revolutions 6 to change the paradigm that innovation is linear – one idea goes directly to the market. Technological innovation evolves from a simple linear process to a much more complex multi-stages process which includes regulatory framework and intellectual properties applications (Andries & De Winne, 2013; United Nations Conference on Trade and Development, 2001). NASA initially developed a scale called Technology Level Readiness (TLR) to assess if an invention or innovation is ready to be marketed (Conrow, 2011; Mackey, 2011). TLR is divided into nine different stages. Each different stage represents a different process/phase (see Figure 1). These processes start with basic research (TLR 1 and 2), then feasibility studies to determine whether the innovation is really able to be implemented (TLR 2 to 4). Next is the technology development in which enhancement or 6 Despite the obvious importance and contributions of innovations to economy, the study of innovation only began with the publication of ‘The Structure of Scientific Revolution’ by Thomas Kuhn. Kuhn highlighted the importance of basic scientific research and commercial values through micro-politics of innovation (Kuhn, 1962). Together with Robert Merton, Kuhn pointed out that innovation depends on scientific knowledge; however innovation also has its systemic and socio-cultural aspects related to scientific knowledge itself, such as ethics and cultural impacts of radical innovations from industrial era (Kuhn, 1962; Merton, 1957) . Hosea Handoyo | www.hshandoyo.net 10 improvement can still be incorporated (TLR 5 to 7). If it passes, then it moves to demonstration and development (TLR 6 to 8). In the two phases, which are almost simultaneously, innovation products have to pass regulations and further commercial developments (TLR 8-9). The last touch comes with further test and commercial launch with marketing operations. Figure 1 Technology Level Readiness (TLR) Scheme Simplified from (Conrow, 2011) and modified accordingly based on (Seán McCarthy, 2014) As an example, one could imagine the development of smartphones. Microelectronics and sensor-technology (photonics) started the innovation with touch screen technology for mobile phones. A model will be produced to test its feasibility. This is the crucial phase where theory is tested on miniature level. Further technology development by incorporating anti-scratch surface or larger capacity battery is needed to develop the technology further. With demonstration to the public and investors, this smartphone requires system development such as software (operating system) or network security. Lastly with more test and models, this innovation is ready for mass-production and the market. The example may look straightforward but one must remember that the stages do not have clear-cut criteria. Different technologies may have different treatment and need shorter or longer time to accomplish each stage. In many cases different stages overlaps. Innovation in pharmaceuticals requires longer phases 8 and 9 for the clinical trials (regulations) compared to computer chips. Nevertheless one thing is clear that different phases represent competitiveness of the product. Any innovations are considered pre-competitive (not yet commercially realistic) until it has a certain system Hosea Handoyo | www.hshandoyo.net 11 that enables consumers to use it, for example until a smartphone has an operating system. Once an innovation has been tested and passed all the regulations and standards, it becomes competitive. The danger of innovation development lies in technology and system development in which many innovative products or technologies cannot demonstrate the added-value or their applications. These phases are also known as ‘Valley of Death’ where time and financial investments go down the drain. 2.3 How does innovation play a role in Industrial Leaderships? Industrial leadership 7 means being in the forefront industries in world market in product or process technology or in production and marketing. Thus, it puts the focus of industries on the technology transfer and its translation to commercial success, rather than merely innovation (David C. Mowery & Nelson, 1999, p. 2) Thus, it should already pass Valley of Death (See Figure 2.2). To achieve industrial leaderships, an industry must at least consider four main critical factors before setting a plan or strategy based on the different TLRs (European Commission, 2013b). These critical factors can be grouped together as resources, institutions (management), markets, and technology. Resources reflect comparative advantages that encompass factor productions including supply of high-skilled labors. Institutions denote governance, firm organizations/managements, institutional leaderships, and inter-firm linkages. Markets are concerned with market regulations and finding the niche in existing market segments or creating a new market 8 (EIT, 2014; Mackey, 2011; David C. Mowery & Nelson, 1999). Technology shows the capability of a firm to stay and compete in the market through innovation. It is also important to be noted that firms must be aware of the TLRs (see Figure 1 and 2) and know how to react to the uncertainty brought by TLRs (Mowery & Nelson, 1999, pp. 5–7). 7 It has a very similar meaning to Porter’s competitive advantage that is to outperform one’s competitors (Porter, 1990); however industrial leadership focuses on technological sophistication and innovative performance. 8 The latter usually involves radical innovations. Hosea Handoyo | www.hshandoyo.net 12 Figure 2 TLR and Industrial Leaderships Simplified from (Conrow, 2011) and modified accordingly based on (Seán McCarthy, 2014) and (David C. Mowery & Nelson, 1999) 2. 4 OECD Innovation System Approach Following Kuhn and Merton studies, the Organization for Economic Cooperation and Development (OECD) investigated further the contributions of science to economy through innovations. OECD started with Cooperation in Scientific and Technical Research (Wilgress Report, 1960). Wilgress Report findings concurs with Kuhn and Merton, that many non-scientific aspects involved and affected in innovation process. A follow-up study by OECD, known as Piganiol Report, set the foundation for OECD Member States’ science, technology, and innovation (STI) policies for the next 25 years – see Annex 5. It is also known as the “system approach”. The report stated, “The scientists (…) has the opportunity to cooperate with the educator, the economist, and the political leader in deciding how science as a social asset can be furthered, and how a nation and the human community can best benefit from its fruits. Science, in a word, has become a public concern” (OECD, 1963a: p. 15). It also outlined science contributions to social, health, economic, security, and well-beings of populations. Piganiol Report has become the first white paper that advocated the importance and the relationship of STI and economic policies. OECD suggested that since most of basic research financing and educational policies come from the government, the government Hosea Handoyo | www.hshandoyo.net 13 should be the key actor that drives innovation. The government innovation policy should be focused on universities and their cooperation with private sectors – a model which was known as ‘The Statist Model’ (see Figure 2.1). Figure 3 Innovation in Statist Model In this model, innovation is led by government policies with limited academia and business collaboration (adopted from Henry Etzkowitz, 2010a, p. 12) In the United States, this Statist model was prominent in 1980s. Innovation policy began to change with the introduction of Bayh-Dole Act (The Bayh-Dole Patent and Trademark Amendments Act). The Act guarantees federally funded research in universities or research institutes to file patents and carry out licensing from these patents. Indirectly, this Act also brings the involvement of industries to interact with universities as partner in licensing or research collaborations (D. C. Mowery, Nelson, Sampat, & Ziedonis, 2001). Thus, innovation policy has shifted from centralized top-down, to a more fragmented model which involves universities and research institutes (academia) and industry – lead by government agencies (see Figure 3). Reflecting on the technological dynamics, economic situations, and empirical findings, OECD system approach evolved from 1970s to 1990s. In 1970s, the Research System focused on the government top down approach to lead innovative activities in academia, private sectors and their collaborations through financial incentives. In early 1980s, with the dire economic climate in Europe, particularly the situation in Great Britain, OECD suggested a more intensive and active undertakings with private sectors and less government interventions. This was laid down in Technical Change and Economic Policy (1980s) (Breschi, Lenzi, Malerba, & Mancusi, 2014; Doloreux & Parto, 2005a; EIT, 2014). Hosea Handoyo | www.hshandoyo.net 14 Eventually, OECD endorses NIS approach in 1990s by highlighting importance of linked activities between government, academia, and private sectors (business) called National Innovation System. – see Annex 5 and Annex 6 as comparison (OECD, 1995). OECD’s priority in innovation is particularly important for Europe since European Union’s science, technology, and innovation policies are primarily reflecting on OECD’s directions (Doloreux & Parto, 2005a). 2.5 National Innovation Systems Built upon OECD “systems approach” concept, three researchers offered a new conceptual framework for science, technology, and innovation with ‘National Systems of Innovations (NIS) by C. Freeman (1987), B.-A. Lundvall (1992), and R.R. Nelson (1993). NIS framework suggest that innovation is part of a larger system comprising different stakeholders with the focus of learning process resulting from different stakeholders’ behaviors and relations within a certain geographical location – see Table 2.3. Thus, it is important to understand the process and primary activities of different stakeholders in different countries (Christopher Freeman, 1987; B.-A. Lundvall, 1992; Nelson, 1993). Table 2 Different National Innovation System (NIS) definitions by the primary principal investigators of NIS NIS completes the innovation conceptual framework in a more diverse and complex approach from various case studies, primarily in Scandinavia, US, and Japan (den Hertog & Remoe, 2001; Chris Freeman, 1995). The latter showed that innovation paradigm also moved from incremental innovations in 1970-1980s to radical innovations in 1990s with the rise of specialised and advanced technology research and Freeman, 1987 "network of institutions in the public and private sectors whose activities and interactions initiate, import, modify and diffuse new technologies." Lundvall, 1992 "the elements and relationships which interact in the production, diffusion and use of new, and economically useful, knowledge ... And are either located within or rooted inside the borders of a nation state." Nelson, 1993 "... a set of institutions whose interactions determine the innovative performance ... of national firms." Hosea Handoyo | www.hshandoyo.net 15 development. Innovation of high technologies does not depend on (technical) research activities alone but also marketing, (legal) administrations and the understanding of commercial world and to an extent politics (Burgelman & Maidique, 2004, pp. 4–8; Klingebiel & Rammer, 2014; Löfsten, 2014; Sears & Hoetker, 2014). With the increasing complexities and uncertainties of advanced technologies, now technological innovations must pass several steps such as certifications, safety tests, patents, product designs, and marketing. In the context of policy making, the former OECD “System Approach” focuses on the role of government with its capacity to make and execute policies as stated in The Research System (OECD, 1975), “… research cannot make alone a valid contributions unless it is harnessed to comprehensive policies”. Rather than focused on the governments, NIS tries to analyze innovation from the process. Thus, NIS takes into account the globalization of research activities, networks of collaborators, clusters*, and the role of intellectual properties – see Figure 5. Figure 4 National Innovation System Schematic Representative Adopted from (Henry Etzkowitz, 2010a, p. 13); Etzkowitz argue that NIS represents fragmented governance (laissez-faire) society More fundamentally, NIS puts the emphasis on ‘greater collaborations’ from networks created from the activities supporting innovation, such as joint R&D between universities and industries, research contracts, or licensing the main innovation sector or ‘national champion firm’. This is one of the main reasons for OECD to study every OECD Member States innovation policy between 2005 and 2010 – see Annex 6. OECD (and to an extent, EU) encourages regions to take action such as: promoting innovation, new Hosea Handoyo | www.hshandoyo.net 16 forms of financing (i.e. venture capitals, business angels networks) through start-ups, business services, and technology transfer; increasing interactions between firms/business and high education/research institutes; encouraging small firms to carry out R&D for the first time; building networks and cooperation in industry; and developing high qualified labours/experts (Bonilla, Bishop, Axon, & Banister, 2014; EIT, 2014; Korres et al., 2011; OECD, 2010) The main critique of NIS is its focus on its national level; setting NIS almost exclusively on the ‘local’ perspective and discounting the regional and global linkages between local cluster or and innovation partners elsewhere. This is certainly becoming more and more relevant with globalization (Chris Freeman, 1995; B. Lundvall, 2007). In California, Apple cannot market a new iPhone without making sure that they do not break other companies’ patents or understand what their international customers wants while at the same time licensing parts of its technology from its rival, Samsung, in Taiwan. Google must follow certain countries’ regulations, for example in regards to censorships in China or Islamic countries. Genzyme, a Dutch biotech company, is also a good example. With their headquarter in The Netherlands, they has two production plants in the United Kingdom, sales branches around Europe and America, and R&D with different universities worldwide (Deborah Spencer, personal communications). Figure 5 Learning Regions and Learning Flows in Regional Innovation Systems Hosea Handoyo | www.hshandoyo.net 17 (summarized by Author from Cooke et al., 2011) 2.6 Regional Innovation System The expansion of NIS concept is also known as Regional Innovation System (RIS). Coming from regional science and economic geography, it puts its core concept on global linkages between innovation stakeholders and partners. RIS proposes that innovation cannot be contained only on national level but also regional level – bringing innovation outside the state boundaries into the neighboring regions – to form „learning regions “ and allow learning flows (Philip Cooke, Gomez Uranga, & Etxebarria, 1997) – see Figure 5. This is more relevant when high/advanced technology is involved as evidenced by European Regional Innovation Systems which is embedded in Horizon 2020 in stimulate interactions and synergy among EU Member States. EU on the basis of OECD’s innovation policy also put their policy emphasis on regional competitiveness by the following five main strategies: (1) regional policies for human resource development, (2) demand-driven focus to human resource development, (3) base competitiveness on the development of partnerships, (4) reinforcement of economic efficiency by policies of equity, and (5) development of regional governance to consolidate national policies. This is reflected by EU’s Social Cohesion and Development Policy and Social Inclusion and Development (Bonilla et al., 2014; EIT, 2014; Korres et al., 2011; OECD, 2010) – see Figure 6. It is EU’s strong view that innovation should address societal challenges while at the same time strengthen the social cohesions and inclusions in Europe. Thus, each policy should be linked and in coherence with other policies which charts a strong regional innovation system. Figure 6 Regional Innovation Systems in Europe (modified from Breschi et al., 2014; Korres et al., 2011) Hosea Handoyo | www.hshandoyo.net 18 2.7 Cluster, Innovation, and Entrepreneurship Both NIS and RIS are almost inseparable with the concept of industrial Cluster or agglomerations of closely related industries for consolidating national policies and gaining regional competitiveness. According to Michael Porter, clusters are “geographic concentrations of interconnected companies, specialised suppliers, service providers, firms in related industries, and associated institutions … in particular fields that compete but also cooperate” (Porter, 1990, p. 197) Numerous studies showed that the presence of cluster in a region stimulate commercialization of research by lowering its entry cost in starting business, creating existing network for reaching critical mass, and providing better access to diverse range of innovative inputs and complementary products (B. Asheim, Cooke, Cooke, & Martin, 2006; Brenner, Cantner, Fornahl, Fromhold-Eisebith, & Werker, 2011; Cooke, 2008; Delgado, Porter, & Stern, 2010; den Hertog & Remoe, 2001). The latter is definitely important for innovation in achieving LEITs which requires a mix and match similar technologies. It is argued that Cluster approach is the most appropriate approach to allow a ‘collective learning system’ to analyze knowledge flows and competitive advantage through interactions between certain types of activities based on four main attributes (Brenner et al., 2011; Delgado et al., 2010). These attributes, which are also known as ‘ Porter’s the diamond’, are context for firm strategy, structure, and rivalry, factor (input) conditions, demand conditions, and related and supporting industries (Porter, 2003). Factor conditions are production factors that determine production and supply of goods/services, such as labour, natural endowment, capital, and infrastructures. Demand conditions speak about the characteristics of (home) market demand. Firm strategy, structure, and rivalry cover the conditions of firms and market regulations in a certain country. The last one, related and supporting industries are the presence or absence of industries that supply and support the value chain of the relevant industry (Porter, 1998) – see Figure 7 . Delgado, Porter, and Stern (2010) found that cluster stimulates entrepreneurship through the growth of start-ups, increased productivity and collaborations among participating firms (and other stakeholders such as academia and government agencies). Furthermore, it also suggests facilitation of decision making through increased communications and collaborations among innovation stakeholders, particularly in RIS learning process. (Delgado et al., 2010) Hosea Handoyo | www.hshandoyo.net 19 Figure 7 Porter's Diamond for Cluster Analysis (Porter, 1990) The latest and more intricate technological innovation gives birth to a new key notion ‘technological entrepreneurship’ under RIS (Breschi et al., 2014; Nacu & Avasilcăi, 2013; Thérin, 2014, p. 17). This notion is a fundamental driver of innovation process. Mere technical knowledge is not sufficient to bring technological innovations. Technological innovation requires entrepreneurial spirit of a person or persons in understanding of commercial world and socio-political environment to make profits and tackle societal issues – see Figure 8 (Andries & De Winne, 2013; Burgelman & Maidique, 2004, p. 12; EIT, 2014; Hargadon & Douglas, 2001). This is why cluster under RIS is very much endorsed by EU under European Cluster Approach (Korres et al., 2011). 2.8 N-Helix Model NIS and RIS are not without its limitations. The systemic approach introduced is not sufficiently responsive to the dynamic of globalization, social relations, and technology life cycle. It fails to address the changing paradigm of market and environment interaction that moves from technology-push to a demand-pull approach in less favored regions or regions with fragmented power (Elias G. Carayannis, Barth, & Campbell, 2012b; H. Etzkowitz & Dzisah, 2008; H. Etzkowitz & Klofsten, 2005). Both NIS and RIS Context for Firm Strategy and Rivalry Demand Conditions Related and Supporting Industries Factor (Input) Conditions Hosea Handoyo | www.hshandoyo.net 20 assumes that innovation is generated in localized learning with fixed activities and centralized power (H. Etzkowitz, 2004). Figure 8 Technological Entrepreneurship and its Complexities (adapted from Burgelman, Robert A, and Modesto A Maidique. Strategic Management of Technology and Innovation. 4th ed. Homewood, Ill., p.5: Irwin, 2004 and modified based on Horizon 2020 concept as outlined by “European Institute of Innovation and Technology (EIT).” Horizon 2020, 2014. http://ec.europa.eu/programmes/horizon2020/en/h2020-section/european-institute- innovation-and-technology-eit.) Thus, we are faced with paradox. Innovation in advanced technology by its nature is unpredictable and full of uncertainty. The risk of failure is high (Andries & De Winne, 2013; Dewar & Dutton, 1986). Despite the effort of rationalizing innovation through the systemic approach, it is becoming clear that there is a distinct need for new and empirical research to simplify the complicated innovation framework, particularly as a Hosea Handoyo | www.hshandoyo.net 21 rule of thumb in decision- and policy-making. The focus shifted from process to actors/stakeholders 9 . 2.8.1 Triple Helix Innovation Model As a response to NIS and RIS limitations, Etzkowitz and Leydesdorff offered another alterative system approach to the innovation called the Triple Helix Innovation Model. This innovation model considers three main actors in innovation policy not exclusive to one another but cooperative and interactive with each other – with overlapping roles in between (Etzkowitz & Leydesdorff, 1996; Leydesdorff, 2012). Figure 9 Schematic representation of Triple Helix (remodeled from Etzkowitz, 2010a) Innovation, the spirit on making things better and more sustainable, obviously cannot originate from centralized policies made by the state (government), but also from involving other ‘intellectual actors’. Academia produces and improves the technological innovations in various universities and research institutes, while the industries are prompted to bring them to the market. All these three actors bring economic and social development. Together, they try to sustain it through equal and mutual relations. Here, the institutional spheres overlap and encourage the actors to collaborate and cooperate with each other. These reciprocal relations and their features are illustrated in Figure 9. 9 Long before, Kuhn and Merton argued that to speed up innovations, identification of key innovation stakeholders is important. This key stakeholder should be the one who is able to intervene and initiate innovation process (Kuhn, 1962; Merton, 1957) Hosea Handoyo | www.hshandoyo.net 22 Thus, rather than ‘dictating; what needs to be done as in NIS/RIS, Triple Helix model allows the stakeholders to decide through learning platforms – the overlapping roles of academia, business, and government in equal way with civil societies as the intermediaries 10 . One distinctive view of relevance to this approach is academia-driven innovation. In Triple Helix Model, academia is the main source of innovation which knowledge and technology are applied together with industry and supportive policies from the government. This is in line with Schumpeter’s idea that combination of knowledge is the heart of innovation and entrepreneurship (Schumpeter & Backhaus, 2003). Furthermore, it also gives much importance to the institutional capacity of academia, particularly the role of technology transfer office (TTO) to synergy and liaise the innovation activities particularly in bridging academia with government and industry (Etzkowitz, 2004). 2.8.2 Quintuple Helix Responding to the economic crises, growth of high technologies, and global warming, Carayannis and Campbell incorporated two other ‘helices’. First, they introduced Quadruple Helix (2009) by adding another helix: media-based and culture-based public and civil societies. He argues that innovation should involve democratic mechanisms in decision making (Carayannis & Campbell, 2009; 2012). This is important because creative industry is inseparable from technology, for example in product design and its practicality to change the public’s lifestyle. Secondly, in the context of global environmental challenges, innovation should also incorporate environment as another key driver to innovation – this model known as Quintuple Helix. As such in global warming, high technological innovations in solar panels and biofuels were driven by the 10 It is clear, that in this model, the definition of each actor is fluid. Rather than defined by its literal definition, each actor is defined by its role in driving innovation (Henry Etzkowitz, 2010a, p. 17). This can be observed in the actions of policy institutions or think tanks or any other civil societies as they can take both roles as ‘government’ and ‘academia’. Consortium of Science, Policy, and Outcome (CSPO) is a think tank that works with the US House of Congress on issues involving new science and technology policies. On one hand, they can be considered as part of ‘government’, while on the other hand, CSPO also works with different universities as part of ‘academia’, particularly Arizona State University, in conducting research and undertaking international collaborations. Here, ‘government’ can also mean international organizations and communities depending on its role which are not bound nationally or regionally but internationally. Some of the examples are: European Molecular Biology Organization, European Science Foundations, Max Planck Society, National Institute of Health, and Commonwealth Science Council. Hosea Handoyo | www.hshandoyo.net 23 need of addressing the climate change and fossil fuels depletions (Carayannis et al., 2012b) – see Figure 10. Figure 10 Schematic Representation of Quintuple Helix (adopted from Carayannis et al., 2012a) Thus, the analytical point of innovation under Quintuple Helix depends on the five aspects: (1) the education system that provides the human capital, (2) economic system that represent economic capital, (3) political system that administer law and create stability, (4) civil society and public that represent the social capitals such as attitudes, values, mindsets, and (5) environment that can be translated as natural environment (in the case of green technology) and comparative advantage (such as natural resources) (Carayannis et al., 2012b). Thus the flow of know-how does not depend on actor. Innovation has to be driven by all stakeholders. 2.9 Summary In short, the study of innovation has just begun in the less than a century. Along with the changes and demands of the public, knowledge production, technology transfer, and commercialization of innovations, the system approach of innovation has evolved rapidly. The development of Technology Level Readiness as indicator to assess innovation has brought a multi-dimension structure, in which innovators are faced with regulatory, market, and cultural frameworks. Hosea Handoyo | www.hshandoyo.net 24 It began with a linear model of innovation which claims that knowledge production depends solely from specific discipline in academia (mode 1), to interdisciplinary approach within academic communities (mode 2). With the introduction of National Innovation System, and later its reformed model, Regional Innovation System, innovation requires a much more comprehensive framework. It does not depend on academia, but through learning process with other stakeholders, business and government (mode 3). In the last decade, in response to the limitations of NSI/RSI, the Triple Helix Innovation Model has started the efforts to simplify and start to blur the boundaries between academia, business, and governance. It argues that in innovation policy making, government cannot stand alone without understanding the nature of science and technology from academia and the market conditions from their business partners. However, unlike RIS, Triple Helix points out the importance of intermediaries, such as technology transfer office as university liaison with government and business. Building upon Triple Helix, Quintuple Helix model adds two more actors: public and environment. Understanding that knowledge in a Quintuple Helix Model is the pivotal force and driver for progress. The Quintuple Helix is a model which grasps and specializes on the sum of the social (societal) interactions and the academic exchanges in a state (nation-state) in order to promote and visualize a cooperation system of knowledge, know-how, and innovation for more sustainable development (see Carayannis and Campbell [2010], p. 62). Thus, the goal of the Helix-Conception is accomplished through the resource of knowledge which produces additional value for society in order to lead in the field of sustainable development. The pivotal question of the Quintuple Helix defines itself in the following way: "‘Where does industrial leadership reside on regional level?” Hosea Handoyo | www.hshandoyo.net 25 Chapter 3 Methodology In this Chapter, I describe the research procedure that I employed to answer the main question. The main methodological approaches used in this Master Thesis are assessment of conceptual framework in line with the research object (3.2) and in-depth interviews with relevant stakeholders (3.3) with additional secondary data collection (3.4). I also elaborate the limitations and challenges faced during the research (3.5). 3.1 Timeline, Funding, and Language The project timeline was between 1 April 2014 – 1 June 2014, however the first exploration of the topic started already from November 2013 with the initial contacts and discussions with experts, researchers, and policy-makers. Some discussions about innovation and cluster have also been conducted during my internship in Thuringian Ministry of Economics, Labor, and Technology between July 2013 and January 2014. Funding for this project was taken from Author’s scholarly expenses with scholarship grant to from The German Academic Exchange Service (Der Deutsche Akademische Austauschdienst, DAAD) awarded by Willy Brandt School of Public Policy, amounting up to € 3.000,00. The primary and working language in this project is English. German is also important as many government documents and local newspaper articles are only available in German. Despite author’s German proficiency, to avoid misinterpretation, the German text will be provided as footnotes and further consultation with native speaker was made to clarify particular passages/ data/information. Several interviews/discussions were also done in German. 3.2 Conceptual framework of innovation and industrial leadership Literature review is important to establish the conceptual framework and set the theoretical foundation of the employed methodology, analysis, discussion, and future research. Three main reference books were used as starting points: Henry Etzkowitz, 2010b; Surinach, Moreno, & Vaya, 2007; and Varga, 2009. Hosea Handoyo | www.hshandoyo.net 26 These books gave the initial background to the concept of technology transfer, innovation system, and regional development with which further detailed search on online database and reference books were conducted. Online database such as Google Scholar, JSTOR, EBSCOhost, and Web of Science were used. Whilst for hardcopies and reference books were obtained from libraries of University of Erfurt, TU Ilmenau, University of Weimar, and Jena Friedrich-Schiller University collections. Furthermore, these references were coupled with EU documents from (EU Database) to the relevant public policy perspective and relevance particularly: Council Decision 2013/743, establishing the specific program implementing Horizon 2020 - the Framework Program for Research and Innovation (2014-2020) and Leadership in enabling and industrial technologies. Decision C 13/8631/EC, The European Competitiveness and Sustainable Industrial Policy Consortium (ECSIP). (2013). Study on the international market distortion in the area of KETs: a case analysis (DG Enterprise and Industry). Brussels: European Commission 11 . Table 3 List of experts/scholars in innovation and industrial leadership Nr Name Expertises/Concepts Institution 1 Elias G. Carayannis 12 Quintuple Helix George Washington University, United States 2 Philip Cooke 13 Regional Innovation System University of Cardiff, Wales, United Kingdom 3 Michael Fritsch 14 Innovation and Economic Geography Friedrich-Schiller-Universität, Jena, Germany 4 Henry Etzkowitz 15 Triple Helix Innovation Stanford University 5 Loet Leydesdorff 16 Triple Helix Innovation University of Amsterdam, The Netherlands 6 Bengt-Åke Lundvall 17 National Innovation System Aalborg University, Denmark 7 Michael Porter 18 Microeconomic of Competitiveness, Cluster Management Harvard University, United States 11 Retrieved from accessed http://ec.europa.eu/enterprise/sectors/ict/files/kets/kets_market_distortion_pdf_report_july_2013_ en.pdf , last accessed 1 December 2013 12 http://business.gwu.edu/faculty/elias_carayannis.cfm. Retrieved April 2, 2014 13 http://www.cardiff.ac.uk/cplan/about-us/staff/philip-cooke. Retrieved April 2, 2014 14 http://www.uiw.uni-jena.de/index.php/team/47. Retrieved April 2, 2014 15 http://gender.stanford.edu/people/henry-etzkowitz. Retrieved April 2, 2014 16 http://www.leydesdorff.net/. Retrieved April 2, 2014 17 http://vbn.aau.dk/en/persons/bengtaake-lundvall(11cfc64f-5a0d-4006-89fd- 9e40dcdd5730).html. Retrieved April 2, 2014 18 http://www.hbs.edu/faculty/Pages/profile.aspx?facId=6532. Retrieved April 2, 2014 Hosea Handoyo | www.hshandoyo.net 27 Subsequently, theoretical knowledge and EU policy documents were coupled and additional relevant data, cases, and references were identified and followed up. The first step was to go back to the initial publications and cross-referenced other publications 19 . In sum, this thesis was based on National/Regional Innovation Systems, Triple- Helix/Quintuple Helix Innovation Framework, Cluster and Competitiveness based on Innovation (see Table 4.2 for the list of experts). 3.3 Primary Data Collection: in-depth interviews and discussions Based on the Regional Innovation System (RIS) (Cooke et al., 2011) and Quintuple Helix Innovation Framework (Carayannis et al., 2012a; Etzkowitz, 2010b), different stakeholders from academia, business, government, NGOs/civil societies, and media were selected for interviews (see Table 4 and Annex 8). This research employed in- depth interviews to gather information relevant to innovation process in Thuringia and Ilmenau. To accommodate different characters of research participants, who are involved in innovation process, in-depth interview is the most suitable and objective method to extract and understand hidden information, underlying motives and holistic perspectives of the interviewee’s positions (Hine & Carson, 2007, p. 15). Most of the interviews were done face-to-face in conventional manners while others were done by telephone, Skype, Google Hangout, or email correspondences. A number of short interviews/discussions were carried out during informal sessions in conferences/workshops. To illustrate the process, please see Figure 11. These interviews started with informal conversational interviews to provide friendly atmosphere and make personal connections. This is necessary to confirm interviewee’s interests in supporting the research and get the same/similar ‘wavelength’ and understanding of concepts/definitions 20 . Following the brief informal conversational interviews, guided interview, with basic prepared questions (see Annex 7), was employed to obtain straight answers and minimize variations between interviews. This was also important set the context of interview to innovation and industrial leadership within the aim of the study. In between the set questions, open-ended questions were also asked, depending on the situation and answers given by the interviewees. This was deemed necessary to 19 This is important as many similar and identical concepts are labelled or named differently by different researchers/experts/policy-makers. See 4.5 Limitations and Challenges 20 See Section 4.5 – challenges in conceptual framework. Hosea Handoyo | www.hshandoyo.net 28 explore, probe, and bring forth information concealed by interviewees. In addition, these open-ended questions provided the flexibility needed to counter different interviewee’s reactions (Berry, 1999; Gubrium & Holstein, 2002). Figure 11 Flow chart of the methodology used in this study (source: author) Following the completion of the interviews, relevant information and data were summarized, catalogued based on the topics/keywords, and followed up questions were prepared. In some cases, further correspondences by Email and telephone were made to confirm certain statements and inquire further information. Hosea Handoyo | www.hshandoyo.net 29 Table 4 List of experts/scholars in innovation and industrial leadership Nr Stakeholders Participants Number of Interviews 1 Academia  Technology Transfer Office  Academics 3 3 2 Government  Thuringian Ministry of Economics, Labour, and Technology  Thuringian Ministry of Education, Science, and Culture  Chamber of Commerce  Thuringian Cluster  EU DG Research and Enterprise 2 2 1 1 1 3 Business  Small-medium Enterprises (start-ups and spin-offs)  Consultancy* 6 2 4 Civil societies/ NGOs  Innovation Institutes  Academic/Research Societies**  Tech transfer intermediary***  Initiatives/associations 2 1 2 2 5 Press/Media Chief Redactor of Local Business Magazine 1 Total Interviews: 29 Note: In some cases, classifications were based on the role of the participants. *) This includes consultancy companies in Erfurt, Thuringia and Edinburgh, the United Kingdom. Since they are profit-seeking, consultancy is considered part of ‘business’ **) Academic/Research societies includes German Research Society (Deutsche Forschunggemeinschaft, DGF), Boehringer-Ingelheim Fonds Network, and UK Biotechnology and Biological Sciences Research Council (BBSRC). Despite their funding from government, research societies acts almost independently from government, thus it can be considered as civil societies. ***) Tech transfer intermediaries are semi-profit seeking associations which owned/directed by government with clients primarily governments and international organisations. This refer to German Society for International Cooperation (Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH). Similar to research societies, their role in innovation and market opening are more or less guided by international cooperation and contracts with SMEs. Hosea Handoyo | www.hshandoyo.net 30 3.4 Secondary Data Collection Empirics and statistics were obtained from EURO-STAT 21 , German Federal Statistical Office (Destatis) 22 , and Thuringian Statistic Office 23 . The information about Thuringia was primarily from TMWAT, 2011 and 2013. While information about TU Ilmenau was taken from TU Ilmenau Yearly Report 2013-2014 (TU Ilmenau, 2013) and released information from TU Ilmenau Technology Transfer Office. Statistics and data from case studies presented in the discussion section will be referenced accordingly. A number of data presented in this thesis was also taken from two innovation and entrepreneurship studies by STIFT as follows Fritsch et al., 2010 and Thüringer Netzwerk für Innovative Gründungen (ThürInG), 2013. Other information was gathered from vast arrays of written sources, such as press releases, news/magazine articles, published documents, promotional materials, and websites of companies, governments, or institutions. Online discussions, particularly on Horizon 2020 LinkedIn groups, were also used as reference to practical experiences. 3.5 Challenges and Limitations The main challenge is to get the opportunities to interview relevant stakeholders. This is primarily difficult with the time availability. In some cases, there were no replies to interview invitations. In that situation, alternative interviewees were sought out. The limitation of this study is the difficulty in personal bias, especially since every stakeholder has their own interest or agenda. Thus, to get some consistency of opinion, more interviews were conducted. Furthermore, there is absence of unified conceptual framework of innovation system, particularly in its definition, national/regional scale, and empirical data validation. Various researchers use ‘National Innovation System (NIS)’ and ‘Regional Innovation System (RIS)’ interchangeably in different levels, scales and inter-relations. This made policy- makers/politicians who are not fully conversed in innovation models (also extensively discussed in Asheim, Smith, & Oughton, 2011; Doloreux & Parto, 2005).As it will be discussed in the next chapter, each framework has its own limitations. Thus, one has to be careful in selecting different frameworks to interpret the information. 21 European Union Statistic Office – EuroStat, http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/ 22 Statistiches Bundesamt, https://www.destatis.de/EN/Homepage.html 23 Thüringer Landesamt für Statistic, http://www.statistik.thueringen.de/startseite.asp Hosea Handoyo | www.hshandoyo.net 31 Chapter 4 Innovation in Thuringia: Moving Forward and Unlocking its Potentials This chapter is the first part of findings. It expounds the innovation strategies in Thuringia based on the discussed theoretical frameworks: Cluster Approach and Regional Innovation System (RIS). Although the theoretical framework started with RIS, Thuringia adopted Cluster policy earlier than Regional Innovation System. Thus, the findings will be presented chronologically. It is summarized by analyzing the stakeholders through the eyes of Quintuple Helix (government, business, academia, civil societies/media, and environment). This section is indebted to Authors’ previous work about Cluster Analysis in Thuringia (Handoyo, 2013). 4.1 Cluster Approach in Thuringia Following Lisbon Agenda in 2000, Germany adopted the Cluster Approach on federal level. The government identified the key industry in each German State and focus on one specific sector 24 (Opaschowski, 2004). In late 2010, Cluster approach was expanded into State level. Thus, every State is expected to identify and develop specific Cluster initiatives (Heimpold, 2011). Cluster policy in Thuringia is designated to compensate for shortcomings of the firm landscape. Thuringia has a small number of large companies (only one company headquarter, compared to 90 headquarters in Bavaria) and the high number of SMEs (TMWAT, 2011, 2012). Thus, the main subjects of cluster policy are the cluster network organizations and firms’ cooperation to build enough critical mass (Heimpold, 2011a, 2011b). 24 According to Jappe et al (2008), Germany started Cluster Approach already from 1990s following the Fall of Berlin Wall; however, the policies were rather general and did not create cluster/industry networks which are crucial for Cluster Policy. Ketels (2006) also identified that Cluster Policy in Europe only came about after Lisbon Agenda (after 2000). [ see Jappe-Heinze, A.; Baier, E.; Kroll, H. (2008): Clusterpolitik: Kriterien für die Evaluation von regionalen Clusterinitiativen, Arbeitspapiere Unternehmen und Region Nr. 3/2008, Karlsruhe: Fraunhofer-Institut für System-und Innovationsforschung (Fraunhofer ISI) Competence Center "Politik und Regionen", in: http://isi.fraunhofer.de/iside/p/download/arbpap_unternehmen_region/ap_r3_2008.pdf?WSESSIO NID=c15d5beb2f56cd7a31d7c281e74e4970, accessed on 02/08/2013.] Hosea Handoyo | www.hshandoyo.net 32 To harmonize the efforts in Cluster Approach, TMWAT created Thuringian Cluster Management (ThCM) 25 as part of broader economic framework called “Future 2020” (Zukunft 2020)(TMWAT, 2012). ThCM has four main objectives. It aims to strengthen existing cluster growth and initiated a new potential cluster; increase expertise of relevant stake-holders and stimulate innovations; to encourage cooperation between Cluster actors and possible directions; and to provide international network support including regional marketing. (TMWAT, 2011) In order to enable participation of all relevant stakeholders in innovation process, Thuringian government sets up four main bodies: Cluster Council, Cluster Board, ThCM, and several Cluster Networks based on the different technologies. The Council meets once a year to review progress and policy implementations by Cluster Board and Cluster Board. It comprises the governmental executives: the Thuringian Ministry of Economy, Labor and Technology (TMWAT), the Thuringian Ministry of Education, Science and Culture (TMBWK) and the State Development Agency (LEG), Chamber of Commerce (IHK), Thuringian Foundation for the Promotion of Technology and Innovation (STIFT), and few other governmental departments. While the Board coordinate the cluster policies between governmental departments. Implementation of policies with Cluster Networks falls under Thuringian Cluster Management (ThCM) which is headed by LEG. (TMWAT, 2012) The structural relationship between these actors is shown below in Figure 12. Its structure is rather rigid with the decision making process is being dominated by governmental bodies and with limited private sectors influence or even academics. This administrative burden often delays decision making and threaten the sustainability of Cluster approach (Sölvell et al., 2003, Interview 3, 25). One could also see the typical German bureaucratic top-down approach and the legacy of centralized governance from the socialist East German era. Thuringia focuses on thirteen clusters divided into three different categories: growing, cross-sectional, and trending sectors as summarized on Table 5. Growing sectors are automobiles (with Opel Eisenach as the driving actor), Life Sciences (under leadership of Jena and Ilmenau), Green Energy (legacy of Solar Valley Centre Germany), and Machinery (Schmalkalden). Cross-sectional sectors represent industries that can support other growing and trending sectors. This category covers plastics and ceramics, 25 http://www.cluster-thueringen.de/ Hosea Handoyo | www.hshandoyo.net 33 micro- and nanotechnology, sensor technology, and optics/optoelectronics; for example, optics/optoelectronics can support automobiles, green energy, and robotics. The third category is trending sectors which are industries that have high market potentials. Green technology, robotics, and edutainment (creative economy) are in this category (TMWAT, 2011). Figure 12 Structure of Thuringia Cluster Management (TMWAT, 2012) Table 5 Overview of Thuringian Clusters (compiled from TMWAT, 2011, 2012) Hosea Handoyo | www.hshandoyo.net 34 Aside from these clusters, Thuringia has two established clusters, which are food industry and logistics 26 . Food industry includes liquor productions (Nordhäuser Doppelkorn), sausage industries, mustard industries, and other local delicacies. Under ThCM, food industry is incorporated into Life Sciences to upgrade its quality and transform it into functional food (nutrition) industries. Logistics is another sector that benefits from Thuringia strategic location in Germany and Europe (TMWAT, 2012). 4.2 Evaluation of Cluster Approach Cluster approach in Thuringia depends on the government (TMWAT) policies (Interview 23). Despite Cluster Council Board efforts to involve other stakeholders, its top-down is still prominent in decision making. Private sector is also not included in the decision making process directly. They are represented by its cluster network (Interview 22). Sölvel and Ketels (2003) argued that in decision making, private sector should be participating in the Cluster Management. The rationale comes from the fact that the private sectors are the ‘soldiers in the war field’. They know better what they need and the field’s situation. In the context of industrial leadership, this is very significant as different companies have to complete not just regionally but also globally (European Commission, 2013b). Furthermore, private sectors are expected to be able to compete globally. Solar Energy cluster in Thuringia, led by Bosch, are having difficult time recently as they are losing their market to Chinese firms 27 . Despite suspected dumping by Chinese solar companies, this could be addressed more effectively by governments if communications between government and firms are closer (Choi & Anadón, 2013).Connecticut Cluster Management is hailed as one of the best examples. Having CEOs of private firms in the Cluster Management leadership enables Cluster Policy responsive towards market dynamics (Porter & Miller, 2003). Figure 13 and 14 list more of Thuringian assets and points of improvement for both government and private sector 28 . Cluster requires a holistic approach and this comprehensive approach requires close communications and cooperation among the stakeholders (Iammarino & McCann, 2006; 26 Tourism is technically a successful cluster in Thuringia particularly with its cultural richness and long history, but it is not part of Thuringian Cluster Initiatives. ThCM uses tourism as part of international marketing strategy under “This is Thuringia” (Das ist Thüringen) and “Discover Thuringia” (Thüringen Entdecken) programs. 27 IG Metall, „Bosch Arnstadt muss bleiben”, 28 June 2013, http://www.igmetall.de/SID- 60970756-94813529/bosch-solar-energy-demonstration-vor-bosch-zentrale-in-gerlingen- 12016.htm, last accessed on 21 July 2013 28 This Figure will be discussed more in the next section as part of the whole evaluation together with RIS. Hosea Handoyo | www.hshandoyo.net 35 Storper & Scott, 2009). However, close cooperation does not mean collective protectionism. Many high technology firms in Thuringia lack the efforts to upgrade their products when we compared to Bioregion in Rhein-Neckar Dreieck (Bug, 2010; Krauss & Stahlecker, 2001). Without upgrading their products through innovation, they are losing their competitiveness and facing the threat of exiting the market (Interviews 4, 5, 11). In addition, there is also limited cooperation between private sectors with HEI/R&D through consortiums, as in Scotland. Corporate Social Responsibility of Pharmaceuticals such as Glaxo-Smith-Kline (GSK) providing PhD Fellowships is often to build strong relationship with the future scientists and innovators. Similarly, Rhein-Neckar Dreieck through Boehringer-Ingelheim has strong CSR by building new laboratories and supports to local research students. This way, small and medium companies can benefit from R&D activities without spending much (Mason & Brown, 2010; von Wissel, n.d.) and at the same time attracting bright students to stay in the area and close to the companies (Interview 1, 24). Rhein-Neckar Dreieck went steps ahead by incorporating Cluster approach in the Regional Planning and Infrastructure. By expanding their innovation strategy, Neckar region adopts the full picture of Regional Innovations System (Krauss & Stahlecker, 2001). 4.3 Regional Innovation System in Thuringia Following one year discourse (between June 2013 and May 2014), TMWAT announces Regional Research and Innovation Strategy for Intelligent Specialization for Thuringia or RIS3 29 . The idea behind RIS3 is to bring the synergy between regional development, cluster approach, and the opportunity of Thuringia innovation strength through research and development (TMWAT, 2013a). By aligning Thuringia’s regional KETs innovation strength and Horizon 2020, the Thuringian government expects to gain more benefits for the local economy in achieving industrial leadership (Interviews 16-20). Two specific sets of tasks underlie the foundation of RIS3. First, it identifies specific needs of the market and what Thuringia can offer. This is imperative in making the links between innovation or technology potentials and the market demands. This is primarily done by Strength, Weakness, Opportunities, and Threat (SWOT) analysis as published by TMWAT (2014) in RIS3 white paper. Secondly, it focuses on the development of tools/instruments for an innovation friendly platform. This platform is the key in bringing all the stakeholders together (see Figure 15). 29 Regionale Forschungs- und Innovationsstrategie für intelligente Spezialisierung für Thüringen Hosea Handoyo | www.hshandoyo.net 36 Figure 13 Diamond Model: Government Role in Upgrading Cluster in Thuringia Modified from Handoyo (2013). Black represents positive aspects of the Cluster, red represents points of improvements. Figure 14 Diamond Model: Private Sectors Influences on Cluster Upgrading Modified from Handoyo (2013). Black represents positive aspects of the Cluster, red represents points of improvements. Hosea Handoyo | www.hshandoyo.net 37 Table 6 Contribution of Knowledge Enabling Technology to Thuringia's Economy Industries/Sectors Gross Value Added Employment Changes between 2008-2020 Changes between 2008-2020 ∆ [Mio. EUR] [%] ∆ [Mio. EUR] [%] K n o w l e d g e E n a b l i n g T e c h n o l o g y A p p l i c a t i v e T e c h Automotive + 720-810 80-90 + 10500-12400 51-60 Life Sciences Biotechnology + 140-150 140-150 + 1600-1800 100-113 Medical Devices + 270-300 123-136 + 3800-4300 83-93 Energy, Energy Storage + 470-530 104-118 + 7100-8100 73-84 Engineering + 220-300 20-27 + 1500-3000 6-13 C r o s s - s e c t i o n a l T e c h Plastics and Ceramics + 520-610 55-64 + 6100-7700 30-38 Micro- and Nanotechnology + 90-100 69-77 + 1000-2400 34-55 Precision Technology + 180-210 72-84 + 2100-3300 45-48 Optics/Optoelectronics + 270-290 135-145 + 1900-2600 46-63 Sum + 2880-3300 67-77 + 35600-43600 39-48 T r e n d G r o w t h A r e a s Green Tech + 820-930 82-93 + 9400-11000 52-61 Service-robotics + 8-9 73-82 + 100-120 43-52 Creative Economy, Edutainment + 120-130 200-217 + 1500-1600 167-178 Sum + 950-1070 89-100 + 11000-12700 57-66 Source: (TMWAT, 2011, p. 250) Hosea Handoyo | www.hshandoyo.net 38 In RIS3, Thuringia sets its technology potentials under four main pillars of intelligent specialisation. They are industrial production and systems, sustainable and intelligent mobility and logistics, healthcare and its technologies, and sustainable energy and resources utilizations (see Figure 16). Each of the pillars represents the interdisciplinary and application-oriented approach towards the implementation of technologies from the different Cluster specializations (see Table 6 and in comparison with Table 5) (TMWAT, 2013a, 2011, 2012). Figure 15 RIS 3 Strategies (modified from TMWAT (2014, p. 7)) This is done by intensifying the partnerships between innovation stakeholders and taking advantage of ICT, creative economy, and services to attain the intelligent specialisation. Creative industries such as advertising companies can help promote innovation products in Thuringia by regional branding ‘Das ist Thüringen” (That’s Thuringia) 30 . ICT can support the networks and communications including the use of social media for public relation efforts (TMWAT, 2011) 30 The advertising video can be accessed on https://www.youtube.com/watch?v=UQxiYXptxqw (DE) and https://www.youtube.com/watch?v=-_B-1ufsNZE (ENG), last accessed 1 July 2014 Hosea Handoyo | www.hshandoyo.net 39 Figure 16 Pillars of RIS3 to achieve its Vision (TMWAT, 2013a, p. 7) 4.4 Innovation Stakeholders: Quintuple Helix in Thuringia Unlike Regional Innovation System which focuses on innovation activities/strategies, Quintuple Helix Innovation Model argues differently. It proposes that innovation that leads to industrial leadership depends on the collaboration of the key stakeholders. The key actors here are government, firms, academics, civil societies/public, and media (Elias G. Carayannis et al., 2012a; H. Etzkowitz & Leydesdorff, 1996). However, this classification overlaps in some organizations for example in the case of Government initiatives (see Table 7). 4.4.1 Government In Thuringia, based on RIS3, TMWAT is the main actor that coordinates the innovation process based on what firms need. On financing side, TMWAT focusses on providing loans, guarantee and subsidies. Aside from that, the focus also comes in participation offer which depend on two different organizations, which serve as knots, under TMWAT among several initiatives: State Development Corporation of Thuringia (LEG31) and 31 Landesentwicklungsgesselschafts Thüringen, http://www.leg-thueringen.de/ Hosea Handoyo | www.hshandoyo.net 40 Table 7 Quintuple Helix Stakeholders in Thuringian Innovation System Government Academia Business Civil Societies Press 1. EU and EC a. DG Research and Enterprise b. National Contact Points 2. BMWi EXIST 3. BMBF 4. TMWAT a. ThEx b. ThCM c. LEG + ThAFF 5. TMBWK THGN EU Referenten 6. IHK TGN 7. TAB 1. HEI a. University of Erfurt b. Bauhaus University c. University of Jena (FSU Jena) d. TU Ilmenau e. FH Jena f. FH Nordhausen g. FH Schmalkalden 2. Research Institutes a. Max Planck Institutes b. Fraunhofer Institutes c. Leibniz Institutes 3. TTO (linked to HEI) 4. Incubators and Technology Parks 1. SMEs 2. Large Firms 3. Consulting Firms 4. Commercial Research Institutes 5. Venture Capitals 1. STIFT 2. Market Team 3. ThüBAN 4. FTVT 1. WIR 2. Wirtschaftspiegel Thüringen (Author analysis) Hosea Handoyo | www.hshandoyo.net 41 Thuringia’s Centre for Start-ups and Entrepreneurship (ThEx 32 ) (TMWAT, 2013a, 2011), interviews 18, 24). LEG was formed in 1992 as part of economy restructuration program following the German reunification. Strengthened by 250 employees, its main roles cover a wide range of sectors from attracting investors, properties, regional development, Cluster, international marketing, regional management and development, energy and green technology, and high-skills employment. The latter is managed in close cooperation with Thuringian Agency for Skilled Personnel Marketing (ThaFF 33 ). Between 1995 and 2003, LEG has helped the formation of 944 companies with 48.550 employees and total investment of 8.6 billion EUR34. Aside its main tasks, LEG strong role in Thuringia’s RIS is on managing the Cluster to as discussed before (see Section 4.1). (TMWAT, 2011) The other government initiative, which is directly involved in innovation and research commercialization, is ThEx 35 . Recently formed in the late 2013, ThEx works a coordinator for various efforts in start-ups formation. Serving as a knot, ThEx harmonizes various NGO/associations efforts particularly in consulting, mentoring, and events such as networking day and business competitions (TMWAT, 2013a, 2011). Furthermore, ThEx fills in the missing link, which many civil societies fail to fill – see Annex . It is to liaise with Chamber of Commerce (IHK) and other relevant government agencies (Interviews 22, 24). How about Ministry of Education (TMBWK)? TMBWK supports innovation by funding basic research and support research infrastructure that favors innovative outputs. This effort was signified by the formation of new division ‘Research and Scientific Infrastructure’ in TMBWK in the first quarter of 2014 (Interviews 9, 19) 36 . TMBWK sets the regional research priorities and aligns its policies with the federal Ministry of Science (BMWi). Unfortunately there are very limited programs of research commercialization due to the Thuringian Education Law that prohibits profit-taking from education institutes. Chamber of Commerce (IHK) is another government body that represents the interests of private sectors. IHK has similar efforts like LEG and ThEx including trainings, 32 Thüringer Zentrum für Existenzgründungen und Unternehmertum, http://www.thex.de/ 33 Thüringer Agentur für Fachkräftegewinnung http://www.thaff-thueringen.de/ 34 http://www.leg-thueringen.de/ueber-uns/uebersicht/, retrieved on 30 December 2013 35 Initially Research and Innovation was primarily coordinated by an ThürING (Thüringer Netzwerkes für Innovative Gründungen, Thuringia’s Network for Innovative Start-ups). See http://www.innovativ-gruenden-thueringen.de/ 36 TMBWK, http://www.bundespresseportal.de/thueringen/item/20071-forschungsexperte- %C3%BCbernimmt-abteilungsleitung-im-th%C3%BCringer-wissenschaftsministerium.html, retrieved on 13 January 2014 Hosea Handoyo | www.hshandoyo.net 42 networking events, and consultations. It has also its own Start-up Network (Thuringian Start-ups Network or TGN). The only different is the influence of TMWAT in decision making. IHK becomes more the private sector lobby platform for the government. 4.4.2 Academia HEI has an important role in gathering, generating, and distributing knowledge and linking it to social challenges as innovation products (Michael Fritsch & Aamoucke, 2013). Research and Innovation in Thuringia can be found in primarily six different cities: Erfurt, Weimar, Jena, Ilmenau, Schmalkalden, and Ilmenau with their HEI institutions (see Table 8). Aside from HEI, R&D by other research institutes such as Fraunhofer Institutes and Max Planck Institutes contributes largely to the research commercialization. In terms of commercialization, each university depends on the proactivity of their Technology Transfer Office (Interviews 1, 2, 3, 5, 7, and 15). Technology Transfer Office (TTO) has a strong role in supporting scientists in their research proposals/applications and/or business plans, providing information/contacts for organizing patent applications/quality controls/certifications, and at the same time encouraging students to be entrepreneurial through various events. In many cases, TTO also manages the university incubator and works closely with technology parks. The main problems of various Thuringia’s TTO are lack of financial supports and limited staffs. A team of mere three to five people cannot really support hundreds of researchers and students who would like to have consultations (Interviews 1, 2, 3, 5, 7, and 15) 4.4.3 Business Thuringia benefits more from Mittelstand economy or SME-based economy (see Table). Large established companies in Thuringia such as Carl-Zeiss and Schott clearly give contributes to the regional economy as predicted . However, it has limited effects only to the localized area – in this case Jena. Other regions of Thuringia, except Eisenach (Opel) and Arnstadt (Bosch), do not have large companies to support them. There are also a number of small consulting companies that fills in the role of TTO such as Stephen Crabbe Consulting and Ellipsis. Commercial Research Centers with their association (FTVT) are also benefitting the innovation in Thuringia (see Table 9 and Annex 10). Many researchers moved to commercial institutes to gain more financial Hosea Handoyo | www.hshandoyo.net 43 rewards and freedom from teaching duties (Interview 20). See Table 8 and 9 for more details. Table 8 R&D Excellence in Thuringia (Author Analysis from (Michael Fritsch et al., 2009; TMWAT, 2013a, 2011, 2012) Hosea Handoyo | www.hshandoyo.net 44 4.4.4 Civil Societies In the Quintuple Helix Framework, civil societies such as NGOs can help the limitations of three core innovation stakeholders described previously. In Thuringia, there are literally hundreds of NGOs in forms of associations (e.V.) that are affiliated with either government agencies, universities, research institutions, or certain industrial sectors. Most of them are working closely with ThEx and LEG particularly in consulting (Interview 5, 24). There are at least four main civil societies which could be classified based on its affiliations. In academia, Thuringia’s Higher Education Institutes Founders Networks 37 (HGN, Hochschulgründersnetzwerk) is the biggest association which covers all HEIs in Thuringia. HGN provides an alliance among all university, university of applied sciences, and technical university in Thuringia. The idea behind HGN is to provide exchange of information and stimulate collaborations among HEIs. However, HGN seems to fall short as lack incentives and competitions for grants between HEIs hinder the collaboration (Interviews 1 and 7). From the government part, aside from the Cluster Networks and Association, EU Contact Points Network of Thuringia (EURNT) 38 is an association that work closely with TMBWK and in particular Department of Research and Infrastructure. It serves as the primary contact for EU projects through EU research projects dissemination, science policy lobby, supports of EU project applications, and consultations. All Thuringian HEIs are members of EURNT too. EURN has a crucial role with regards to Horizon 2020 and EU Leadership in Enabling and Industrial Technologies by making sure that HEIs and applicants are fully aware of the restrictions and opportunities offered. However, EURN has limited collaborations with SMEs which are also targets of Horizon 2020. The current strategy is to have HEIs as their extension to local SMEs. The most important civil society in Thuringia is Thuringian Foundation of Technology, Innovation, and Research (STIFT). STIFT publishes yearly independent innovation studies of Thuringia. Working as partner to TMWAT, TMBWK, HEIs, and firms, they offer consultation and mentoring. Other than that, STIFT, together with TMWAT (in particular ThEx), organizes the Thuringia’s Innovation Award for innovative companies. They also organize other business plan and elevator pitch competitions. 37 For more HEI Start-ups Network, please visit http://hsgbi.files.wordpress.com/2011/09/c3bcbersicht_grc3bcndungsnetzwerke_exist.pdf 38 EU Referenten Netzwerk Thüringen. http://www.eu-forschung.de/ Hosea Handoyo | www.hshandoyo.net 45 Table 9 Commercial Research Institutes in Thuringia Research Institutes B i o t e c h n o l o g y M e t a l l u r g y M i c r o - / N a n o t e c h A u t o m o t i v e E n g i n e e r i n g M e d i c a l T e c h P r e c i s i o n T e c h O p t i c s P l a s t i c s / r u b b e r s CiS Institute of Microsensors and Photovoltaics x x X x fzmb Gmbh Research Center of Medical Technology and Biotechnology x x GFE Society for Production Engineering and Development x x x x x x INNO VENT Technology Development x x x x x x x x ifw Günter Köhler Institute for Joining Technology and Materials Testing x x x x x x x TITV Textile Research Institute Thuringia/Vogtland x x x TITK Thuringian Institute for Textiles and Plastics Research x x x x x x IAB Institute of Applied Construction Research x x x x (Source: TMWAT, 2013a) 4.4.5 Media The other important stakeholder of innovation is press. Media is believed as platform of formal communication, promotion, and lobby between all the stakeholders. Aside from other common and more federal-level magazines, such as The Business Weekley or newspapers, Thuringia also relies primarily on WIR magazine 39 by TMWAT and privately-owned Wirstchaftspiegel Thüringen (WST) 40 . There has been lack of press coverage in many occasions. While WIR focuses on government success, WST is less appreciated. At the end local newspapers become the main source of information although it is not focused on technology per se. 39 Stands for Business, Innovation, and Resources, 40 http://www.wirtschaftsspiegel-thueringen.com/startseite.html?no_cache=1 Hosea Handoyo | www.hshandoyo.net 46 Chapter 5 Innovation in Thuringia under Microscope This chapter is the continuation of Chapter 4 with the focus on evaluating the innovation system in Thuringia. To dig deeper, Ilmenau has been chosen to understand the situation better. This is necessary to explore, probe, bring forth concealed informations, particularly since most of the data gathered are only published by Ministry of Economics (TMWAT). With the overview of Thuringian Regional Innovation System, the question is still laid open, “where does industrial leadership from innovation reside?” or in other words, with all the strategies and framework, what or who the key driver for innovation in regional level is? To answer this question, Illmenau in the southern part of Thuringia is an interesting location to study. It has a population of 26.000 people from which 7000 of them are students enrolled in Technical University (TU) Ilmenau. (TU Ilmenau, 2013) Ilmenau’s economy for centuries depended on natural resources, such as silver and copper, and tourisms. The opening of railway that connects Ilmenau with Erfurt in 1879 marked the beginning of industrialization. The economy shifted to manufacturing of ceramics/porcelain and glass. Following the reunifications, Ilmenau lost its porcelain industry while the glass manufacture started to produce laboratory apparatus and measurement devices (TU Ilmenau, 2013) 5.1 TU Ilmenau Limited train connection (up to twice an hour connection only to and from Erfurt) and isolation by mountainous regions do not stop Ilmenau from being the one of the leading innovative regions in Europe (Interview, OECD). The success seems very tightly connected with the existence of TU Ilmenau. The precursor of the university was a technical college “Thüringisches Technikum” in 1894. High quality graduates developed it further into Technical University with intensive research in 1992. The research activities of the TU Ilmenau to the six interdisciplinary and cross-faculty research cluster Nanoengineering, Precision Technology, Biomedical Engineering, energy and environmental technology, Digital and Media Technology, Computer Hosea Handoyo | www.hshandoyo.net 47 Sciences and Mobile Communication. Aside from technology, TU Ilmenau also offers courses in economic sciences and business engineering 41 . In 2004, the University was admitted to the German Research Foundation (DFG). The Research of the TU Ilmenau is also supported by other non-university research institutes, such as the Fraunhofer Institute for Digital Media Technology (IDMT), the Fraunhofer Application Center System Technology (AST), a branch of the Fraunhofer Institute for Integrated Circuits (IIS), the Thuringian Institute for Textile and Plastics Research and the Institute for Microelectronic and Mechatronic systems strengthened. University success on research and its impact to local economy can be assessed based on two aspects among many other indicators, research grants and the number of start- ups. TU Ilmenau received up to €44.73 million in 2012 alone (see Table 10). From this, about 10% came from industry and another 7% from EU. Table 10 Research Funding in TU Ilmenau 2010 2011 2012 Federal Government 10,01 14,43 13,68 State of Thuringia 4,59 7,59 7,89 German Research Society 7,25 8,39 8,09 EU 1,38 1,30 3,82 Industry/Private Sector 4,51 4,68 4,96 Charity 0,00 2,78 3,70 Sum (in Mio EUR) 30,25 39,47 44,73 (Source: TU Ilmenau, 2013, p. 19) Between 1995 and 2008 Ilmenau contributes to 7% of the start-ups activities in Thuringia. If we compare this with Jena (9%) with more research institutes and financial supports, Ilmenau shows a much better and successful track record (Michael Fritsch et al., 2010, p. 49). From these start-ups, Ilmenau has higher entrepreneurial activity, measured by the number of or percentage of start-ups in the regions compared to the State (see Table 11). These signify efficiency in technology transfer and research commercialization. 41 Wirtschaftsingeneurwesen Hosea Handoyo | www.hshandoyo.net 48 Table 11 Regional Distribution of Entrepreneurial Activity in Thuringia Sector Ilmenau (%) Jena (%) Cutting-edge Technology 12,4 12,6 High Technology 7,2 6,4 Service-based Technology 6,8 9,8 Non-technical Commerce 4,9 8,2 General Proportion 5,1 4,4 Source: (Michael Fritsch et al., 2010, p. 42) % represents proportion towards total prop of State of Thuringia 5.2 Fostering Entrepeneurship in TU Ilmenau: Auftakt To stimulate transfer of technology, TU Ilmenau relies on Auftakt 42 , a start-up forum which is organized by ‘Gründerforum Ilmenau e.V.’ and the technology transfer office of TUI Ilmenau. Rather than top-down approach by University, Auftakt was formed by a number of students, staffs, professors, and external partners. Since 2011, this Entrepreneurship Initiative provides support in business issues, provides contacts and office space and is especially popular for one thing: a founder-friendly climate in which start-ups feel good. (Corinna Bastian, 2012; Hofer et al., 2013) Their three pillars activities, awareness, consultations and supports, and networking, have largely made impacts to the number of start-ups in Ilmenau. Unlike many initiatives that rely on mere business consultations and workshops (auftakt.Basis), Auftakt also organizes experience sharing and dialogs (auftakt.Cafe), quizzes and games about entrepreneurship knowledge (auftakt.Rallye), and speed-dating with investors (Venture Capital Campus). By creating networking events, discussions, competitions, and workshops, Auftakt increases the entrepreneurial spirit among TU Ilmenau students and researchers.(Hofer et al., 2013; TU Ilmenau, 2013) 42 www.auftakt.org Hosea Handoyo | www.hshandoyo.net 49 The core activity of Auftakt comes in professional consulting which covers all three phases - pre-seed, start-up and growth phase - as the contact person for any founders/entrepreneurs especially for existing funding opportunities. To bring together all stakeholders of the start-up support, Auftakt created local and international networks, which are constantly being expanded. This combines particularly founders, founding interested, investors, sponsors, coaches and mentors. In addition, this way Auftakt creates opportunities to mutual exchanges between those who just started with the experienced ones (Corinna Bastian, 2012; Hofer et al., 2013; TU Ilmenau, 2013). The focus becomes changing the mindsets of those who are hesitant in taking a step forward to commercialize their research (Interviews 1 and 8). 5.3 Assessing Regional Innovation System in Thuringia Innovation in Thuringia is a work in progress. The recent RIS3 demonstrates Thuringia’s commitment to innovation. Thuringia has many assets and potentials that can support innovation and thus achieving industrial leadership (see Table 12, left column). Three main assets specific to Thuringia is the location, government support in cluster and regional innovation system, and high quality infrastructures. Thuringia’s location in the center of Germany and relatively strategic to the new market in East Germany makes it an attractive investment location, especially supported with high quality infrastructures. Arguably, the government support is tremendous in setting an investment and political climates that are friendly to innovation. However, government is also the main liabilities by imposing so much bureaucracy (Interviews 1-5, 8, 11-15, 17). While appreciating the efforts of TMWAT in streamlining start-ups and entrepreneurship through ThEx, there are still limited collaborations with many stakeholders, such as TMBWK and ThCM. There are also many overlapping initiatives between IHK, TMWAT, and TMBWK. This can be seen in different initiatives between three government bodies with the same goal: increasing start-ups. Hosea Handoyo | www.hshandoyo.net 50 Furthermore, in the context of public policy, Thuringia suffers from political typecasting inherent in German political system where different political parties, despite being in coalition, are hesitant to work together (Interviews 3 and 25). Table 12 Assets and Liabilities of Innovation in Thuringia Assets Liabilities Europe / Germany / Thuringia  High quality of infrastructures and public transports;  Strategic location that connects West and East Europe (expansion potential);  High R&D funding from Federal level;  Long history and rich culture with good quality of life;  Two streams of education system: theoretical and practical approaches  Negative demographic changes (productive age 18-40 segment shrinks -10%, while 65+ grows up 40%);  Less than 2% Thuringian GDP R&D expenditures;  Dependency on EU funding;  Lack of political discourses among ruling parties, coalitions, and oppositions and also between states;  Low level of internationalization, discourages international skilled migrants Cluster Policy  Strong government Cluster supports under Thüringen Cluster Management (ThCM);  Existing expansion with Saxony and Saxony-Anhalt;  World-renowned universities and research institutes (Max Planck, Frauenhofer, Leibniz, INNOVENT);  Curricula is mainstreamed to knowledge/skills needed the cluster  Lack of inter-institutional collaborations between universities and research committees  Too concentrated on two locations: Jena and Ilmenau; lacking interdisciplinary research with other universities – even between the two core cities, they are still reluctant to collaborate;  Cluster network has weak cooperation between private sectors and research activities in universities or R&D Regional Innovation System / RIS3  Strong commitment from government to support innovation, both federal (EXIST) and State (RIS3)  Existing communication platform through various associations  Primary operation is through imitation;  Low export quota with diagnostics only about 25%, lowest compared to other clusters  Focus on start-ups not on alternative commercialization such as licensing. Hosea Handoyo | www.hshandoyo.net 51 Another aspect that should be highlighted is the lack of collaborations between stakeholders and regions. Thuringia has a strong regional identity that discourages collaborations between regions, including HEIs. This is evident from the low reception of regional policy “Tricity Project” that tried to strengthen three cities in Thuringia (Erfurt, Weimar, and Jena as a metropolis region). The city’s inhabitants feel that the project will only take away the city’s identity 43 . Despite the project’s benefit on paper 44 , the project did not get through and was shelved less than a year later with the resignation of the Minister (despite the resignation was not due to the project) 45 . In HEIs, competition for grants and other type financing may well the main reason for the lack of collaborations between universities or other research institutes (interviews 3, 21, 25). Other than that, each university has developed their own niche (see Table 8), thus many feels that they prefer to collaborate with other universities in Germany or abroad rather than within Thuringia (Interviews 2, 4). This can be fatal as many universities in Thuringia do not cater a broad range of subjects except University of Jena (Interview 25). Studies have shown that there is a strong correlation between high technology innovations and the wide range of subjects being taught. The reasoning behind this is clear, high technology, such as KETs, requires mix-and-match of different technology sectors and disciplines. Thus, becoming specialized in one sector is only pre-requisite to be competitive in KETs (Ketels et al., 2006; Ketels, 2003). Furthermore, if we align this with Horizon 2020 that includes societal challenges and dimension in EU Research framework, HEIs in Thuringia has much to do complement their missing links. For example, University of Erfurt only focuses on humanities while TU Ilmenau has the focus of engineering and natural sciences. Obviously, a close 43 http://www.thueringer-allgemeine.de/web/zgt/politik/detail/-/specific/Machnigs-Idee-einer- Dreistadt-Erfurt-Weimar-Jena-fuehrt-zum-Eklat-139339552, retrieved on 31 May 2014 44 http://jena.otz.de/web/lokal/politik/detail/-/specific/Raumplaner-lobt-Machnigs-Plaene-fuer- Dreistadt-Erfurt-Weimar-Jena-1296426586, retrieved on 31 May 2014 45 http://www.spiegel.de/politik/deutschland/ermittlungen-gegen-spd-politiker-machnig-eingestellt- a-959483.html, retrieved on 31 May 2014 Hosea Handoyo | www.hshandoyo.net 52 cooperation between the two Universities will create a better synergy, for example, a call in Health, Demographic Change, and Well-being for Personalized Medicine 46 . TU Ilmenau and Metralab 47 could provide the technology while University of Erfurt could support in providing governance framework for personalized medicine. Going further than EU framework, this close cooperation would also offer knowledge exchanges and increase Thuringia’s competitiveness. 46 http://ec.europa.eu/programmes/horizon2020/en/h2020-section/health-demographic-change- and-wellbeing, retrieved on 20 June 2014 47 SME in Robotics, a start-ups from TU Ilmenau. Hosea Handoyo | www.hshandoyo.net 53 Chapter 6 Where Theory Meets Practice With the situation presented in the previously (Chapter 4 and 5), this chapter seeks to answer the hypothesis and the research questions. Moreover, it also draws new aspects that are only explored briefly in the earlier. In order to keep this section as concise as possible, each sub-chapter will be addressed based on the theoretical questions presented in Chapter 1 ‘Introduction’ and Chapter 3 ‘Methodology’. 6.1 Can Cluster Approach and Regional Innovation System stimulate innovation and achieve industrial leadership? Empirical studies have shown that economic growth and industrial leadership coming from business formations (spin-offs and start-ups) and regional entrepreneurship culture. However these vary between different regions (Michael Fritsch & Aamoucke, 2013; Michael Fritsch, 2014; Sölvell et al., 2003; Varga, 2009). Furthermore, industrial leadership needs a strong synergy in networks and sectorial support (Ketels et al., 2006; Mowery & Nelson, 1999, p. 9; Sandström & Carlsson, 2008; Storper & Scott, 2009). This is positively reflected in the networks of innovation system and cluster approach as shown by Thuringia’s RIS (RIS3) and Cluster Management (ThCM) (TMWAT, 2014). Nevertheless, this framework still depends on the collaboration of the stakeholders (Leydesdorff, 2012). While appreciating TMWAT’s efforts to put various initiatives for start-ups under one umbrella, the lack of cooperation between stakeholders, including with TMBWK is a challenge on its own. This can be seen from the several government initiatives for example in the case of Thuringia’s Centre for Start-ups and Entrepreneurships (ThEx) and ThCM which are under TMWAT. Both of the agencies have rather limited collaborations and in many cases discourages private actors and entrepreneurs to participate in the programs (Interviews 3, 25). Several interviews with CEOs of high tech companies in Ilmenau argued that while they in principal support the government policies, they find it difficult to follow the bureaucracy and in many cases have limited information about what supports are available for them and whom to contact (Interviews 6, 8, 12, and 13). Moreover, specifically for Europe, Ketels (2004) pointed out that many European industry sectors come into clusters without an organized or systemic approach from neither private sectors nor governments. They grow ‘organically’ or simply by keeping up with the market (Ketels, 2003). Porter (1990) in his book “The Competitive Advantage Hosea Handoyo | www.hshandoyo.net 54 of Nations” already presented several best practices of European Clusters that grew organically such as the forestry products clusters in Sweden and Portugal and become leaders in their respective market (p.249). However, these individual cases have been evolving into clusters from long processes and time to reach their critical mass. Therefore, while acknowledging the importance of RIS and Cluster approach in stimulating entrepreneurship, it is important to change our paradigm that innovation policy through entrepreneurship requires region-specific strategies and consideration of local stakeholders (Carayannis & Campbell, 2012; Dejardin & Fritsch, 2011; Fritsch, 2002; Fritsch et al., 2010; Fritsch & Slavtchev, 2011; Fritsch, 2014; Kauffeld-Monz & Fritsch, 2013; Ketels et al., 2006). 6.2 Where does leadership in enabling and industrial technologies reside? The emphasis for Leadership in Enabling and Industrial Technologies (LEIT) lies on R&D to strengthen industrial capacities and business perspectives, including SMEs. This also covers Public-private partnerships (PPPs), cross-cutting technologies, ICT, and their impact to address societal problems (European Commission, 2013b). This means that greater variety of products and problems solutions to increase Europe competitive advantage by having more brains and ideas, while at the same time getting out of the deadly loops of thinking. Numerous studies propose that industrial leadership resides on the State level particularly with such broad emphasis, both economically and socially. Thus, the most important actor that should drive one region to be a global player or leader in their niches is government through their monetary and non-monetary policies. Monetary policies can be through grants, subsidies, and bank-guarantee (Brenner et al., 2011.; Houghton & Sheehan, 2000; Shane, 2005). On the other hand, non-monetary policies can be the formation of agencies and intermediaries that can help HEIs and private sectors to commercialize their innovations (B. Asheim et al., 2006; H. Etzkowitz & Leydesdorff, 1996). In Thuringia, this is evidently can be seen through ThEx, ThCM, THGN, and EXIST network (Interview 24). However, in the context of enabling and industrial technologies, industrial leadership depends on innovation and innovation depends on research. Thus, LEITs resides on the most innovative and commercially-active stakeholders, which can be HEI or research institutes, or firms (Interview 1, 3, 14, 15, 25). In the case of Jena, in the early 1900s that industrial leadership depended on private firms’ innovation such as Schott and Carl- Hosea Handoyo | www.hshandoyo.net 55 Zeiss. Recently, it shifted towards the strong collaboration between academics and private firms, including Schott and Carl-Zeiss (Cantner & Graf, 2006). Weak links between European university and industry are the key of losing technological competitiveness with the United States (Feser, 2012; Fritsch & Aamoucke, 2014; David C. Mowery & Nelson, 1999, p. 364). How about a small region? As mentioned before that innovation requires region-specific strategies and policies, one can look up to Ilmenau. Ilmenau started differently. While lacking large firms and being isolated, Ilmenau has become of the most important innovation hubs in Europe (Hofer et al., 2013). Ilmenau innovation depends on the research commercialization coming from TU Ilmenau and the existing SMEs (Interview 17). Technical University, such as TU Ilmenau provides an advantage by having already the emphasis on application (Mowery & Nelson, 1999, p. 363). TU Ilmenau has the Biomedical Engineering Faculty, an inter- and intra-disciplinary faculty that creates a new research field, as such robotics and medical devices (Interviews 1, 8, 14). This is important in delivering new KETs technology (Interviews 4, 15, 16, and 20). Empirical study in the United States showed that petrochemicals industry comes from chemical engineering faculty in 1970-1980s ( Mowery & Nelson, 1999, p. 364). In this case, LEIT depends on the TU Ilmenau strategy and its technology transfer activities. Therefore, in terms of policy making, government should identify the most innovative stakeholder to consult in order to achieve LEIT. 6.3 What is the most important factor to sustain LEIT? Regional Innovation System and Cluster approach put the emphasis on collaboration. Based on the interviews, it is very interesting that the focus of all stakeholders is on social capitals, particularly personal relationships and trust-building. Based on the case in Ilmenau, many entrepreneurs started their company and stay in Ilmenau because of their social network and close relationships with university staffs (Interview 14). One prominent example is Metralab. The founders of Metralab are TU Ilmenau Alumni with a wide range of subject, computer science, industrial management, and neuroscience. Their companies are continuation of research projects with one of the founder’s Professor. Despite their financial success, Metralab still puts its base in Ilmenau further because the founders have started family there. A number of other interviews also support the importance of social capitals (Interviews 3, 8, 11, 12, 24, and 25). Hosea Handoyo | www.hshandoyo.net 56 The importance of social capitals has been overlooked for many years. The notion is strong as indicated by the importance of mentoring and intermediaries. The founders of Auftakt, the entrepreneurship forum in Ilmenau, went further and identified trust in social networks is important in stimulating research commercialization. This is why Auftakt’s mission is to create an entrepreneur friendly environment by changing the attitudes of students and researchers towards entrepreneurship. Research showed that Auftakt has rightly done so by building confidence and understanding the decision-making process (Hofer et al., 2013). Why trust and personal relationships are important in innovation process? The first is to overcome the risk-averse attitude or hesitance to commercialize their research due to risk and high uncertainty (Nooteboom, 1999; Woolthuis, Hillebrand, & Nooteboom, 2005). Mentoring is one of the solutions to deal with this reluctance by providing enough information. Going outside one’s comfort zone is not easy. Many academics have to reconsider their tenure and career to be entrepreneurs or move to industry. In terms of strategy, all the focus on research commercialization is by becoming an entrepreneur and starts a company ((Goethner, Obschonka, Silbereisen, & Cantner, 2012; Obschonka, Goethner, Silbereisen, & Cantner, 2012). Moreover, there are many ways to commercialize. One of the ways is through licensing in which the innovator. Coaches or mentor are expected to give a balanced opinion. Secondly, trust and personal relationship are needed to compensate the lack knowledge. Innovation process, represented in the regional innovation system, requires a person to understand various aspect of regulatory framework, market framework, and network access aside from his/her own expertise on one specific technology sector. To fully understand the whole process is almost impossible (see Figure 13). Researchers need someone whom they can trust to help them and at the same time becoming their personal advisor (Interviews 1, 3, and 8). Nevertheless, in high technology sector, several interviews also pointed out that the mentors should also understand the researchers’ field – a sensible idea but difficult to find mentors with similar backgrounds. (Interviews 3, 6, 7, 12, 13, and 14) The best case example was the GET UP Start-up Networks between 1999 and 2005 in Thuringia. The aim was to stimulate start-ups like ThEx. However the most important aspect from this framework that makes it different from ThEx was the decision process that enabled each of different regions to participate. GET UP had offices in all regions with HEI. Unlike ThEx which is centrally coordinated in Erfurt. Each office was represented by high university officials that acted on behalf of the scientists, students, Hosea Handoyo | www.hshandoyo.net 57 and entrepreneurs in the regions. This empowered trust building, while at the same time preserved the local identity and sense-of-belongings (Goethner et al., 2012; Martinelli, Guerzoni, & Cantner, 2013; Obschonka et al., 2012). An interview with a scientist, who is also an entrepreneur in Ilmenau, supported framework similar to GET-UP. He argued that the university officials know better of the region innovation and thus, speeded up the decision making process (Interview 13) Figure 17 Innovation Process in the Head Source: WEF, 2014 World Economic Forum (WEF) just recently (April 2014) took attitude as the key factor to entrepreneurial culture. They argued that before one country designs innovation policy to increase regional competitiveness, fostering an attitude that is open to entrepreneurial career is the beginning of innovation. An entrepreneurial attitude will encourage a person to learn other skills while at the same time change the cultural framework in his/her surroundings (see Figure 17 and 18). Figure 18 Processes of Innovation Source: WEF, 2014 Hosea Handoyo | www.hshandoyo.net 58 Changing one’s attitude is not an easy task, particularly for academics who are the drivers of innovation. The key influence in changing one’s attitude is perceived behavioral control or how much one could control the consequence of their actions. Decision making in high uncertainty situation needs many considerations. But is it a reasonable move to do? Research shows that the two influencing factors which are necessary to encourage entrepreneurial attitude: entrepreneurial experience and one’s (working) environment (Goethner et al., 2012). In a very entrepreneurial university, such as Harvard and MIT, the chance of academics (including students) is higher (Ketels, 2003). In Germany, this is rather difficult due to academic environment that discourage profit-taking activities in HEI (Michael Fritsch & Wyrwich, 2013 and Interviews 1, 3, and 25). Thus, supports from technology transfer office, linkages with public support agencies, and closer interaction with industries are believed to be the initial steps to overcome the initial loss zone in early development of innovation (see Figure 1). Rather than just focusing on technology transfer activities, personal relationship and trust-building become key aspects to consider in fostering an entrepreneurial mindset and culture in academia (Hofer et al., 2013; Obschonka et al., 2012; Tödtling, Prud’homme van Reine, & Dörhöfer, 2011; WEF, 2014). This will create a sense of belonging of a person to his/her place of work and the city. 6.4 What are the best indicators for achieving LEIT? LEIT covers diverse spectra from business, technologies, education, and also societal issues. The concept of LEIT itself is rather new (2010), therefore not much have been studied. The current assessment based on EU level put together indicators of innovation and industrial leadership. However, these indicators been assessed as one package. Recently, several studies (EIT, 2014; Michael Fritsch, 2014; WEF, 2014) have recently explored LEIT, though not directly, by widening the concept of innovation, not just for economic development but also to address societal challenges. Before we discuss the possible indicators to achieve LEITs, it is important for us to understand the basic requirements of innovative and entrepreneurial economy. They are (1) the size and quality of the regional knowledge base as a source of new ideas and entrepreneurial opportunities (Houghton & Sheehan, 2000; Surinach et al., 2007); (2) the regional culture of entrepreneurship (Tödtling et al., 2011) (3) qualifications of the regional workforce (van Oort, Oud, & Raspe, 2009); (4) the availability and the quality of Hosea Handoyo | www.hshandoyo.net 59 other inputs (Martinelli et al., 2013); and (5) the intensity of local competition between newcomers and incumbent firms on Porter’s Diamond ( Fritsch et al., 2010). From these basic requirements, OECD argues that government should use employment and the number of start-ups as the primary indicators for innovation. World Economic Forum (2014) also suggested that access to financing, such as through grants and venture capitals, should have some merit. Yet, access to finance can also be represented through the number of start-ups (Interviews 1 and 25). However, LEIT is difficult to be assessed based on employment or the number of start- ups. In the initial phases of industry life cycle, there are always high numbers of new business formations or start-ups. Then, as the industry grows and weakens, employment goes down and business formations are relatively low. Thus, it is difficult to conclude that both are causal. Furthermore, if we put the different technology based on its readiness (TLR), this industry life cycle can either longer or shorter (Conrow, 2011). For example, when one compare software and biotech start-ups. A software start-up, which develops Apps for smartphones, can grow and decline fast. At the same time, financing software-based start-ups requires much less investments due to its low fixed costs. The number of new employment from this type of companies is also less compared to a biotech start-up with much more financing, risk, and technology development (Cantner & Rake, 2014). Thus, we can only consider employment and the number of start-ups as initial ‘symptoms’ of growth but not empirically consider that as a stable indicator for LEIT (Fritsch, 2002; Fritsch, 2014). Furthermore, employment on its own is also difficult as new business formations, through these start-ups, increase competitions, and may well lead to reduction of employment for production efficiency in other companies. As a market rule, which inefficient producers get removed from the market, new start-ups could also replace incumbent companies (Fritsch, 2014) – just like the old cells, being replaced by the new cells. Nevertheless, start-ups can actually positive as long as the incumbent and the new companies could manage a strong relationship which leads to a better innovation and share the ideas to define their own niches (Interviews, 1 and 25). The discussion we have so far only focusses on short term measures of the number of start-ups and we have not touched the important key aspect of LEIT, which is the (long- term) impact to the society. Moreover, as discussed in the previous question, one could not measure social capitals in the context of personal relationship and trust-building. Discussions with EC and Thuringia’s government officials acknowledge the gap in measuring the success of one region in achieving LEIT. The current approach relies only Hosea Handoyo | www.hshandoyo.net 60 in the efficiency of Horizon 2020 approved projects evaluation. Dr. Peter Härtwich from DG Research and Innovation argued that Horizon 2020 encourages the participation of SMEs and their collaboration with HEIs. He believes that collaboration between HEI and SME is enough as of the most important indicators for LEIT, aside from the number of start-ups and employment (Interview 10). I would argue that the number of innovative products coming from one region is the most important indicator in LEITs. Why can this be the case? If we look at the pharmaceuticals industry, new medicine is the innovation product of long research. The impact to the society can be directly measured by the number of patients being cured or helped by the medicine. Therefore, a region should not just focus on the number of start- ups or employment or the number of successful grant proposals but also focus on how many new innovative products or research commercialization come from that region. The number of sales will also indirectly indicate the success of the product in providing solution to society’s challenges. Nonetheless, we should still make exceptions in the case of high technology such as sensors for satellites which have definitely lower number of sales compared to medical devices. One of the main criticisms towards using the number of products entering the market is the fact that different KET products have different life cycle (Thérin, 2014). A biotechnology product requires minimum five years for product development while software could take a year or even less to enter the market. Thus, while direct short-term general impact can be signaled by the number of start-ups and employment, the number of innovative products could serve as the long term indicator of success. 6.5 Impact and its Possible Implementation in Developing Countries Developing countries need the technology transfer from developed countries such as Germany and OECD countries. Innovation products such as draught-resistant seeds or water-filter with carbon nanotubes that can sieve harmful bacteria are useful (Carsten Schmitz-Hoffmann, ‘The Role of Private Sectors in Development Agenda’, European Development Days 2013). The study presented could offer two important lessons in context of development and innovation, and innovation policy-making in developing countries. The first aspect is improving livelihoods of developing countries with the new technologies. This is mutual ‘symbiosis’ or cooperation. The developed countries can help the country while at the same time these development programs can also open Hosea Handoyo | www.hshandoyo.net 61 markets for SMEs and other large firms (Interviews 2 and 4). The danger comes from dependencies on developed countries. However, under Europe’s Policy Coherence for Development, any new technologies being introduced to Europe’s partner countries, requires a technology transfer program. Thus, developing countries can also improve their innovation culture while at the same time having already a step ahead with supports from developed countries (European Commission, 2013a). Secondly, many of developing countries entrepreneurship policy-makings are hampered by lack of cooperation between different stakeholders. In the case of Indonesia, several government agencies have overlapping programs and there is hardly collaboration between universities (Kusmayanto Kadiman, personal communication). This situation is rather similar to Thuringia. Thus, this study appeals to the importance of social capitals in innovation policy making particularly in fostering entrepreneurial mindsets as discussed previously. 6.6 Outlook and Future Research Innovation covers a broad range of subjects and disciplines. This study provides important insights towards the importance of social capitals, such as personal relationships and trust-building in stimulating entrepreneurship in a region. Thus, innovation policy making cannot be seen through the eyes of economists alone, but also psychologists and politicians. Fostering a mindset requires interdisciplinary approaches. Innovation depends on the decision making process under fundamental uncertainty. Therefore, this brings us to exciting future research questions: how can policy makers reduce uncertainty from strategic choice and interactions in innovation in the field of KETs? Can strategic interactions between relevant stakeholders trigger innovative activities and thus bring about the entrepreneurship in academia? What knowledge management or decision-making tools can we develop to catalyze the decision-making process, especially in a bottom-up approach? What kinds of institutional designs and intervention are necessary to keep such frameworks sustainable, especially in a decentralized system? Are these designs and tools transferrable to other countries, in particular developing countries? Unmistakably this study only provides the first step in a long and winding road ahead where we have to make decision both pragmatically and academically or “pra-cademic” 48 . 48 The term was first coined by Fred van Eenennaam from Decision Insitute., http://www.centerforcompetitiveness.nl/vision-2/methodology, last retrieved 1 July 2014 Hosea Handoyo | www.hshandoyo.net 62 Conclusion Research and development activities reflect key source of innovation to achieve industrial leadership and economic growth in knowledge-based economy. Recent EU Horizon 2020 Framework Program has signified the importance of innovation in securing and improving Europe's competitiveness, particularly with knowledge enabling technologies or KETs. KETs are cross-cutting technologies that support the development of other technologies or their applications such as medical technology, advanced materials, and biotechnology. With a total budget of €960 billion in the next six years, European Union aims to bring innovation and its applications from lab bench to boardrooms, and to the living rooms. However the whole process for applying for the grants, despite being heavily reformed, is still rather bureaucratic. This hampers the impact of innovative research and technology transfer for the society. The interest in innovation studies received a wider attention from the technology boom of Silicone Valley in mid-1990s. The general theoretical literature on innovation focuses on Regional Innovation System while industrial leadership concentrates on Cluster approach. However, these theoretical framework on this subject, specifically in the context of KETs and industrial leadership are inconclusive on several vital questions within the policy making discourse in regional level. The study sought to answer two of the following questions. First, what explains innovation-based industrial leadership in regional level? Secondly, where does the industrial leadership reside? This study proposed that innovation and industrial leadership depend on active policy-making of the government. To answer the questions, this study selected the region of Thuringian Ilm-Kreis in Germany with Technological University (TU) Ilmenau as the spearhead of innovation in the region. This isolated region has become of one raising stars of innovation despite limited funding and spill-over effects from large companies compared to other bigger cities in the region. Numerous site visits and interviews in Ilmenau provide a better understanding of the region. It gives the chance to connect the theory into practice and put the gathered information in perspective. The main empirical findings are chapter specific and were summarized within the respective empirical chapters: chapter 4 with the regional innovation system in Thuringia with case of TU Ilmenau and chapter 5 with the discussion and analysis in efforts to answer the research questions. This section will synthesize the empirical findings to answer the study’s two research questions. Hosea Handoyo | www.hshandoyo.net 63 What explains innovation-based industrial leadership in regional level? Industrial leadership depends on policy synergy for technology transfer and collaboration of all innovation stakeholders, which are government, academia, business, civil societies, and also the media. In the context of KETs, several factors become increasingly important in technology transfer: networking and supports to find a niche and to enter the market. Mentoring is another aspect that has been identified as significantly help start-up formations and cultivate entrepreneurial attitude among academics. However for KETs, it is crucial to find mentors who are technology-specific respectively. Interestingly, for a rather isolated region such as Ilmenau, there are two most important aspects that keep many companies stay in Ilmenau. Firstly, it is personal relationship between entrepreneurs and the TU Ilmenau and secondly, it is the trust built from the relationships themselves. These conclusions were based on the testimonials of many entrepreneurs and CEOs of technology companies. In many cases, project collaborations were made because of how well one knows each other rather than mere personal qualifications. The difficulty in grasping other academic fields or technologies imposes a high level degree of trust to establish partnership. Therefore, innovation policy requires strategic approach on personal level by addressing the social capitals, such as personal relationships and trust-building, in a region or cluster. For the second question, where does the industrial leadership reside? Many of the interviewed stakeholders argued that industrial leadership, in theory, resided on the State level. This can be explained as one region cannot sustain itself, particularly in the framework of Technology Cluster Approach. In practice, it offered a different explanation. Innovation depends on research. Research depends on higher education institutions (HEIs), research institutes, and R&D intensive firms. Thus, to achieve industrial leadership resides on the most innovative and commercially active stakeholders. This pattern can only be an indication of generalization, if the regional innovation system clearly emphasizes collaboration and role-sharing in technology transfer and research commercialization. Nevertheless, in the context of region with limited cooperation among the stakeholders, industrial leadership depends on the intensity of collaboration between HEIs/research institutes and firms as evidenced by the innovation success of Ilmenau and TU Ilmenau. The theoretical frameworks for innovation therefore need to be revisited in order to further understand the dynamics and links between innovation and industrial leadership. Inherently, Regional Innovation System (RIS) suggests a sustainable innovation economy through interlinked innovation activities (Cooke, 1997). This approach Hosea Handoyo | www.hshandoyo.net 64 complements the Porter's Diamond model that helps to identify the competitive advantage of a regional innovation system (Porter, 1990, Delgado et al., 2009). However, as proposed by Triple Helix Innovation (Etzkowitz & Leydesdorff, 1996) and its further development, Quintuple Helix (Carayannis & Campbell, 2009), it is also constructive to focus on the overlapping roles of the stakeholders, rather than the processes. Focusing on RIS and Cluster Approach is consistent with what presented by OECD (2014) and European Commission (2014). However, it contradicts that of Mowery & Nelson (1999) which also puts significance in technology-specific policy for industrial leadership for different innovation stakeholders. Nooteboom (2010), Cantner (2012), and Fritsch (2013) argued that innovation system should also take into account the psychological determinants of the trust-building among the stakeholders. One particular policy program with extended theoretical underpinnings was the Auftakt Program from TU Ilmenau. Auftakt has been hailed as an icon of success in stimulating entrepreneurship and technology transfer by OECD (OECD, 2013). By creating an entrepreneur-friendly climate which start-ups feel good and confident, its programs reach out to the university students, researchers, and potential funding and private partners through personal relationships and consultations. The relatively small university with high research intensity makes the personal contacts possible. However, the lack of funding and reluctance to take risks by starting a company become challenges to overcome. This study has used empirical findings to show that the current Regional Innovation System and Cluster Approach are not making the full impact. These theoretical frameworks assume that every stakeholder in innovation process is willing to collaborate with each other. In practice, this is difficult to attain. Based on this study, conflict of interests and overlapping responsibilities are prevalent in Thuringia. Furthermore, Regional Innovation System approach supposes that each technology sector behaves similarly. Again, this is also misleading perspective. High technology sectors such as KETs have their own complexions and characteristics. While having the same natural sciences principles, biotechnology and engineering have different approaches to analyze and offer solutions to societal problems. The theoretical arguments for this justification suggest the need for policy review which will enable linkage mechanisms, either through interdisciplinary mentoring or associations by tech ambassadors and Alumni network. These linkage mechanisms are also beneficial to address the importance of social capitals, such as personal relationships and trust-building, in innovation and collaboration. Hosea Handoyo | www.hshandoyo.net 65 The scale of innovation debate is therefore extensive and multifaceted even at the regional and local level. Thus, to generate achievable policy strategies and development targets with regards to industrial leadership, there is need for more investigations at the local level to allow further assessment of local dimensions of the subject. Exploring the following as future research strategies can facilitate the attainment of this goal. However, it is clear that there is no rule-of thumb that could copy the success of Silicone Valley. Future outlook of innovation model brought forward by this study is in the behavior of human decision making under fundamental uncertainty of technology development. This is particularly important in the different nature of academics and entrepreneurs. Academics are rational decision makers. They tend to avoid risk-taking behavior which is completely the opposite of the entrepreneurs. Therefore, this bring us to the future research questions: how can policy makers reduce uncertainty from strategic choice and interactions in innovation in the field of KETs? Can strategic interactions between relevant stakeholders trigger innovative activities and thus bring about the entrepreneurship in academia? What knowledge management or decision-making tools can we develop to catalyze the decision-making process, especially in a bottom-up approach? What kinds of institutional designs and intervention are necessary to keep such frameworks sustainable, especially in a decentralized system? Are these designs and tools transferrable to other countries, in particular developing countries? The study has put another brick onto the wall of innovation knowledge, particularly in regional innovation system and its policy strategy. Although, there are no policy measures that can guarantee the emergence of technology cluster and industrial leadership, this study opens up another door to interdisciplinary approaches in policy- making by combining economics, politics, and psychology among other related disciplines. Hosea Handoyo | www.hshandoyo.net 66 Chapter 7 Policy Recommendations These sets of policy recommendations were derived from this study. They were selected based on the (primary) stakeholders involved in the innovation process in Thuringia. The main consideration of these policy recommendations are visibility based on the current situation and comparative case studies. Several recent published policy recommendations are also included below as further reference: 1. WEF. Enhancing Europe’s Competitiveness Fostering Innovation-Driven Entrepreneurship in Europe. Insight Report. Competitiveness. Geneva: World Economic Forum, 2014. http://www.weforum.org/reports/enhancing-europe-s- competitiveness-fostering-innovation-driven-entrepreneurship-europe. 2. TMWAT. Regionale Forschungs- Und Innovationsstrategie Für Intelligente Spezialisierung Für Thüringen. Erfurt: Thüringer Ministerium für Wirtschaft, Arbeit und Technologie, May 15, 2014. 3. Hofer, Andrea-Rosalinde, Jonathan Potter, Dana Redford, and Jakob Stolt. Promoting Successful Graduate Entrepreneurship at the Technical University Ilmenau, Germany. OECD Local Economic and Employment Development (LEED) Working Papers. Paris: Organisation for Economic Co-operation and Development, April 3, 2013. http://www.oecd- ilibrary.org/content/workingpaper/5k4877203bjh-en. 4. Thüringer Netzwerk für Innovative Gründungen (ThürInG). Innovative Gründungen in Thüringen: Entwicklung und Ausblick 2013. Thüringer Netzwerk für innovative Gründungen. Stiftung für Technologie, Innovation und Forschung Thüringen (STIFT), December 20, 2013. http://www.stift- thueringen.de/fileadmin/user_upload/stift/studie_2013_23122013.pdf. Hosea Handoyo | www.hshandoyo.net 67 I. Thuringian Ministry of Economics, Labor, and Technology  TMWAT and TMBWK should have a closer cooperation, particularly in innovation strategy as described in RIS3 white paper.  Since many innovations come from universities and commercial research institutes, therefore it is important to incorporate University partners (or through TGN), FTFV, and Patent Office in ThEx. The collaboration will provide a better communication platform between the stakeholders.  In order to gain synergy in industrial leadership, ThEx and ThCM should cooperate and seize the opportunity of closer collaboration between SMEs and HEIs in R&D and technology transfer.  Include licensing and other alternative commercialization under ThEx  Initiate collaboration with GIZ as opportunity to open markets for Thuringian SMEs in GIZ-partner countries. II. Thuringian Ministry of Education, Science, and Culture  TMWAT and TMBWK should have a closer cooperation, particularly in innovation strategy as described in RIS3 white paper.  Incorporate entrepreneurship in the curriculum already from secondary schools  Coordinate Thüringer Grundernetzwerk (TGN) and EXIST-III using previously Get-Up Framework to provide as a better decision making and collaboration platform between HEIs in Thuringia.  Encourage more cooperation between Thuringian HEI, commercial and non- commercial research institutes. Hosea Handoyo | www.hshandoyo.net 68 III. Technology University Ilmenau (particularly for the Technology Transfer Office and Auftakt)  With the success and recognition of Auftakt by OECD, when the financial situation is possible, more staffs for TTO and financial support to Auftakt would be necessary to boost the performance of TTO and Auftakt;  Endorsing the Alumni Network that is currently being discussed, as communication platform between the current students and alumni. Furthermore, this Alumni Network can contribute to the financing of start-ups;  To increase collaboration with student initiatives, such as Market Team and Entrepreneurship Society, which have similar vision and mission. IV. Small and Medium Enterprises (and Start-ups) in Knowledge Enabling Technologies  Connect with GIZ and TTO to discuss the possibility of doing projects together, particularly as GIZ could open a market for many SMEs in developing countries. 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Hosea Handoyo | www.hshandoyo.net 80 ANNEX 1 Overview of Different Technologies Name of Technology Short explanation Example Nanotechnology Manipulation technique of materials on the atomic or molecular scale (Nano: one billionth of a meter; analogous to a soccer ball compared to the earth) ‘Nano’ tubes in the solar cells Micro- and Nano- electronics Electronics in small level, micro refers to a miniaturised version of larger electronics while nano-electronics refer to the application of nanotechnology in electronics. Microelectronics: computer chips Nanoelectronics: cancer detector Photonics The application and use of light properties Detectors in digital cameras, optical sensors in computer, laser surgery Advanced Materials Synthesis or production of new or better materials, this can be based on metals or even biologicals Anti-scratch phone displays, unbreakable ceramics/glass Biotechnologies The use of living organisms to make useful products Enzymes in detergents, DNA cloning Advanced Manufacturing New ways that improve products or production processes The application of robots and sensors to detect cracks in ceramic production Information and Communication Technologies Integration of wireless communication methods, computers, and means of communications Software, computer network security, mobile phones Summarized and simplified from: Karlsson, Charlie, Börje Johansson, and Roger R. Stough. Entrepreneurship and Dynamics in the Knowledge Economy. Studies in Global Competition. New York, NY [u.a.]: Routledge, 2006. http://www.loc.gov/catdir/enhancements/fy0654/2005012118- d.html http://www.gbv.de/dms/bsz/toc/bsz12098542xinh.pdf. Sismondo, Sergio. An Introduction to Science and Technology Studies. John Wiley & Sons, 2011. Hosea Handoyo | www.hshandoyo.net 81 ANNEX 2 Location of Thuringia in Germany Taken from the back cover of: TMWAT. Thuringia: 100 Stories, 100 Surprises. Regional Marketing. Erfurt: Thüringer Ministeriums für Wirtschaft, Arbeit und Technologie. http://www.das-ist- thueringen.de/data/download/Thueringen_100_Geschichten_100_Ueberraschungen.pdf Hosea Handoyo | www.hshandoyo.net 82 ANNEX 3 Location of major innovation cities in Thuringia Major cities with higher education institutes are with red box. They are (from left to right): Schmalkalden, Nordhausen, Ilmenau, Erfurt, Weimar, Jena. Eisenach (most left) is also included due to its significance in automotive cluster. Taken from the back cover of: TMWAT. Thuringia: 100 Stories, 100 Surprises. Regional Marketing. Erfurt: Thüringer Ministeriums für Wirtschaft, Arbeit und Technologie. http://www.das-ist- thueringen.de/data/download/Thueringen_100_Geschichten_100_Ueberraschungen.pdf . Hosea Handoyo | www.hshandoyo.net 83 ANNEX 4 Geographical Situation of Ilmenau Ilmenau is located about 33km south of Erfurt in the northern edge of Thuringian Forest at an altitude of 500m of elevation. The basin where the city and TU Ilmenau are located is surrounded by four different mountains (indicated by green color of the forest). They are Pörlitzer Höhe (north), Ehrenberg (east), Tragberg (east), Lindenberg (south), and Hangeberg (west). The white broken line shows administrative border. Image was taken from Google Maps (2014) under Creative Commons License. Hosea Handoyo | www.hshandoyo.net 84 ANNEX 5 OECD Systemic Approach Publications Year Title 1960 Cooperation in Scientific and Technical Research 1963 Science and the Policies of Governments 1966 Fundamental Research and the Policies of Governments 1966 Government and the Allocation of Resources to Science 1966 Government and technical Innovation 1966 The Social Sciences and the Politics of Governments 1968 Fundamental Research and Universities 1968-70 Gaps in Technology 1971 The Conditions for Success in Technological Innovation 1972 Science, Growth, and Society 1972-74 The Research System 1980 Technical Change and Economic Policy 1981 Science and Technology Policy for the 1980s 1988 New Technologies in 1990s 1991 Technology in a Changing World 1992 Technology and the Economy: the Key Relationships These are OECD publications (white papers and reports) between 1960-1992 during Systemic Approach before adopting National Innovation Systems. Compiled from OECD Library http://www.oecd-ilibrary.org/ (last accessed 1 February 2014) Hosea Handoyo | www.hshandoyo.net 85 ANNEX 6 OECD National Innovation Systems Year Title Notes 1995 National Systems for Financing Innovation 1997 National Innovation Systems 1999 Managing National Innovation Systems 1999 Boosting Innovation: The Cluster Approach 2001 Innovative Networks: Cooperation in the National Innovation Systems 2001 Innovative Cluster: Drivers of National Innovation Systems 2001 Innovative People: Mobility of Skilled Personnel in National Innovation Systems 2002 Dynamising National Innovation Systems 2005 Governance of Innovation Systems 2006-2010: year gaps of OECD Member States Innovation Policy Reviews including different technology sectors – with collaboration from EU 2010 Measuring Innovation: a New Perspective 2010 The OECD Innovation Strategy: Getting a Head Start on Tomorrow 2013 Knowledge Networks and Markets 2014 Making Innovation Policy Works: Learning from Experimentation - in collaboration with World Bank 2014 Intelligent Demand: Policy Rationale, Design, and Potential Benefits These are OECD publications (white papers and reports) after dopting National Innovation Systems starting from 1995. Compiled from OECD Library http://www.oecd- ilibrary.org/ (last accessed 1 February 2014) Hosea Handoyo | www.hshandoyo.net 86 ANNEX 7 Guiding Questions for Interview The main research question: What explains innovation-based industrial leadership at regional levels? In the context of theoretical framework: Are Regional Innovation System and Cluster Approach sufficient to stimulate innovation? More specific questions for interviews/discussions: 1. How can innovation from start-ups and spin-offs contribute to regional economy and achieve industrial leadership? 2. Who is the main stakeholder that sustains innovation and industrial leadership? 3. What are the barriers of innovation and industrial leadership? 4. How the innovation stakeholders (academia, business, government, NGOs and media) address the barriers of innovation? 5. What kinds of supports are available to stimulate innovation? 6. What can policy do to stimulate innovative start-ups? 7. What kind of policy is suitable to cultivate entrepreneurial attitudes and activities? 8. Who starts innovation and industrial leadership? 9. Where does industrial leadership reside: regional, sectoral, or national? Hosea Handoyo | www.hshandoyo.net 87 10. How can the regional innovation system in Thuringia/Ilmenau be improved? Some of the questions were similar to the follow up questions from: Fritsch, M. (2014). New Firm Formation and Sustainable Regional Economic Development–Relevance, Empirical Evidence, Policies. However, this project and the publication were conducted separately as this project started in November 2013. The similarity is coincidental. Yet, it points out the importance and relevance of the undertaken project. Hosea Handoyo | www.hshandoyo.net 88 ANNEX 8 INTERVIEWS AND SELECTED QUOTES Nr. Position DOI Justifications Quotes 1 Technology Transfer Office Manager (TU Ilmenau) 4 December 2013 TTO is the university gatekeeper with government, business partners and research commercialization. It also helps many research grant proposal submissions.  There is limited interaction between different stakeholders (decision makers)  The focus of entrepreneurship is still on business-plan competitions  University is not part of Cluster Strategy  There are many overlapping entrepreneurship programs 2 Representative of GIZ for Thuringia in Erfurt (Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH, GIZ) 13 December 2013 German Federal Enterprise for International Cooperation is a federal enterprise owned by German Federal government with states and many international organizations as clients. GIZ has a strong role in opening new markets for German companies in developing countries.  Thuringia's innovation products and technology have strong potential to help developing countries, however the idea of opening new markets in developing countries are still not yet attractive due to the perceived risks. Hosea Handoyo | www.hshandoyo.net 89 3 Innovation and Entrepreneurship Head Coach of STIFT (Die Stiftung für Technologie, Innovation und Forschung Thüringen, STIFT) 7 January 2014 Foundation for Technology, Innovation, and Research is a public organization funded by European Enterprise with aim to promote technology transfer and research commercialization through start-ups and private sector collaborations among many other things.  Security is an important aspect that shapes German people's attitude. This makes people in many cases risk-averse and thus demotivates them to be entrepreneurial.  Universities only focus on university activities, teaching and basic research. Research commercialization is not always the priority - though this is changing lately.  Innovation technology requires people, such as mentors, who have strong interdisciplinary backgrounds to guide researchers/scientists to commercialize their research, find the niches/market, and come up with business models/exit strategies.  There is a strong need of raising the business awareness of scientists.  There are always ways to improve the cooperation and Hosea Handoyo | www.hshandoyo.net 90 communications between government bodies, universities, and other initiatives to build regional economy. 4 Head of Sustainable Market, GIZ (German Federal Enterprise for International Cooperation (Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH, GIZ) 14 January 2014 GIZ is a federal enterprise owned by German Federal government with states and many international organizations s clients. GIZ has a strong role in opening new markets for German companies in developing countries.  Horizon 2020 has the potential to develop local innovation and GIZ can provide the links to partner countries and open the markets there,  Through GIZ knowledge sharing, we (German stakeholders) can learn from Partner countries. With limited funding from federal and local governments, many German states depend on EU funding, however EU funding requires streamlining of policy from federal to local regional government. The synergy is still missing nowadays and thus making the eligibility to get the EU funding a challenge. Hosea Handoyo | www.hshandoyo.net 91 5 Professor of Entrepreneurship at Erfurt University of Applied Sciences Business Mentor Book writer "Coachment', 7 steps of entrepreneurship 22 January 2014 Representative from academia and business mentor  Mentoring is necessary, but we need someone from the same background. Someone from biotech business should not be a mentor for an entrepreneur working on ICT products We need entrepreneur ambassadors that serve as"role models" to students - in most cases, personal contacts would address the risk-averse attitude of the students Financing entrepreneurial activities in HEI is always difficult, especially in this education financing climate. Hosea Handoyo | www.hshandoyo.net 92 6 CEO of software company Entrepreneur from university 16 January 2014 Representative of entrepreneur from academia  Mentoring is important but only with the right person with similar background. For start-ups, supports from local city council or government are always crucial, for example in making the application easy and finding a place to start the business. What is mroe crucial is the supply of local talents from (local) university. Personally, venture capitals are very much discouraging as they gain ownership of our hardwork setting up the company. It is best to grow 'organically' 7 Tech Transfer Officer of Ernst Abbe University of Applied Sciences in Jena 5 February 2014 Another perspective from TTO office in Jena  Jena has the advantage of big companies which provides spill- overs effects. However, it makes local talents get absorbed by big existing companies rather than settingup their own companies. Cooperation with other HEIs and research institutes are definitely important and fruitful, despite it is still rather limited. Hosea Handoyo | www.hshandoyo.net 93 8 Founder of TU Ilmenau Entrepreneurship Forum 'Auftakt' Managing Director of Venture Capital Firm Entrepreneur, TU Ilmenau Alumni 6 February 2014 Representative of entrepreneur from academia Part of TTO in TU Ilmenau Initiator of entrepreneurship forum  Bottleneck funding in TLR5 and TLR6 innovation products Funding of start-ups should come from communcal (alumni) networks to increase sense of belonging. Subsidies only create dependency ThEX is a good idea, however universities are not part of ThEX membership. Thus, it has very limited cooperation with HEIs. 9 Head of Research and Infrastructure Department, Thuringian Ministry of Education, Science, and Culture 11 February 2014 Representative of Ministry of Education, Science, and Culture  There is a strong link between infrastructure and research.For example, the mission of TMBWK is to increase research capacity of Thuringia. Thus, the new speed train (ICE) line that connects Berlin and Munich will certainly help the mobility and knowledge exchanges. Horizon2020 certainly can complement the funding of research and increase the research capacity of Thuringia. Hosea Handoyo | www.hshandoyo.net 94 10 EC DG Research and Innovation 11 February 2014 Representative of European Commission  Horizon 2020 is the improvement of previous research funding which couple research and innovation under single program for the first time. Furthermore, the aim of Horizon 2020 is to address societal challenges in open society - the future of Europe. Unlike its predecessors, Horizon 2020 requires (natural) sciences to work together with social sciences and humanities. 11 CEO of EU Research and Technology Consulting company 11 February 2014 Representative of consulting company with much experience in EU research grants  LEIT reflects on the political thinking of EU in the coming years  Horizon2020 will force researchers to think outside the box, identify the application of their research to solve Europe's social challenges, and implement it.  There is a strong need to collaborate with many other institutes from other EU Member States, thus Horizon 2020 builds European competitiveness as Hosea Handoyo | www.hshandoyo.net 95 whole. Not just focused on regional level. 12 CEO of Medical Devices Company and a Neuroscientist 12 February 2014 Representative of entrepreneurial scientist  Support for start-ups, especially in high tech company, is in the value chains and guarantee for investments.  GET-UP scheme in early 2000s was, in my personal view, the most successful entrepreneurship funding because it specifically involved HEI leaders to participate in the direction of Thuringian innovation. 13 CEO of Medical Devices Company and a scientist 17 March 2014 Representative of entrepreneurial scientist  The most important factor in local economic development is relationship and trust between the people.  In the case of Ilmenau, the long- term relationship with the university supplies the talents.  Many of the grants have too much bureaucracy which at the end does not make sense to spend our time on grant proposals writing. Hosea Handoyo | www.hshandoyo.net 96 14 CEO of Robotics Company Engineer and Business Developer 19 March 2014 Representative of entrepreneurial scientist  In the case of our company, it all started with a group of people and a good relationship with our professor in TU Ilmenau.  This highlights the importance of trust, personal relationship, and partnership - especially when we are working interdisciplinary. 15 Head of EU Project Grants for TU Ilmenau 26 March 2014 Representative of TTO, providing the EU grant perspective  In such small state, a better cooperation between different stakeholders and a centralized organization would create a critical mass that increases Thuringia's competitiveness.  Many of researchers, CEOs of start-ups, and other stakeholders have not comprehend the benefits and the importance of EU funding, such as provided by Horizon 2020 scheme. This points out the importance of a good network as a mean of communicating the information - selling the ideas and benefits of EU grants. Hosea Handoyo | www.hshandoyo.net 97 16 EU Commissioner for Regional Politics 16 June 2014 Representative of European Commission  Horizon 2020 aims to bring synergy in European Innovation by inviting SMEs to participate in tech transfer 17 Rector of TU Ilmenau 16 June 2014 Representative of Academia, Head of University  Technology transfer requires strong collaborations with SMEs, not just relying on entrepreneurial activities.  Academics hope TMWAT and TMBWK have a better synergy in terms of policy 18 Minister of Thuringian Economics, Labour, and Technology 16 June 2014 Representative from government  Cluster approach should be infused to RIS.  With ThEX, Thuringia tries to bring all entrepreneurship initiatives under one umbrella 19 State Secretary for Thuringian Ministry of Education, Science, and Culture 16 June 2014 Representative from government  The main focus of TMBWK is supporting the basic research  We agree that innovation is important to the economy. That is the amin reason why we support TTOs 20 Chair of Innovation Strategy of VDI Technology Centre GmbH 16 June 2014 Innovation Researcher and practitioner  RIS is definitely a muss have. It creates the critical mass and brings efficiency – especially in public-policy making. Hosea Handoyo | www.hshandoyo.net 98 21 Professor of Network Security and Computer Sciences 15 January 2014 Representative of Academia  One should look from the perspective of scientists. We are not trained to make risky decisions.  In the context of entrepreneurship, it is a real danger that tenure creates a comfort zone. 22 Creative Industry and Entrepreneurship Advisor at Thuringian Ministry of Economics, Labor, and Technology 9 June 2014 Entrepreneurship Policy Officer  Lack of collaboration between different actors is always the main concern  Networking event might work but it is difficult to assess or quantify 23 Head of Cluster Department at Thuringian Ministry of Economics, Labour, and Technology 22 May 2013 Cluster Expert  ThCM is a step forward in building regional competitiveness.  The main challenge is to bring all the actors to sit down and have public discourse 24 State Secretary for Thuringian Ministry of Economics, Labour, and Technology 19 June 2014 Representative from government  TMWAT and TMBWK are having close cooperation in developing RIS3  Indeed, a closer collaboration should be present, but we are working on it.  Different ministries have different guides to follow. Hosea Handoyo | www.hshandoyo.net 99 25 CEO of Incubator 16 July 2014 Expert in research commercialization  The key is in the University. If a University has a wide range of disciplines, this already create a critical mass  Large companies only focus on their activities in the value chain.  Large companies forget the importance of university in supporting innovations – most of the times.  Incubators are indeed important – especially in applied sciences.  SMEs are too small to network with large companies. They have not much to offers. Usually it takes 5-8 years before they can approach large companies and have meaningful collaborations Hosea Handoyo | www.hshandoyo.net 100 ANNEX 9 Overview of ThEx Name Sector T e c h T r a n s f e r C o n s u l t i n g A d m i n i s t r a t i v e s u p p o r t M a r k e t i n g F u n d i n g E v e n t M a n a g e m e n t ThEGA Thüringer Energie- und Green Tech Agentur Energy and Green Tech x x x x x GWT* Beratungsnetzwerk Gründen und Wachsen in Thüringen Cross-sectoral, support for start-ups x x x ThEX / ThürInG* Thüringer Zentrum für Existenzgründungen und Unternehmertum Cross-sectoral, support for start-ups x x x x ThAFF Thüringer Agentur für Fachkräftesicherung Labor, Employment x x x ThAK Thüringer Agentur für die Kreativwirtschaft Creative industry, edutainment x x x x ThIMo Thüringer Innovationszentrum Mobilität Mobility, transport x x x x ThCM Thüringer Cluster Management Cross-sectoral x x x TI Thüringen International Cross-sectoral x x ThüBAN Thüringer Business Angels Netzwerk Cross-sectoral x x Author Analysis from http://www.thex.de/ueber-das-thex/ Hosea Handoyo | www.hshandoyo.net 101 ANNEX 10 Locations of Commercial Research Institutes in Thuringia Source: (TMWAT, 2013a) Hosea Handoyo | www.hshandoyo.net 102 Declaration (Erklärung) gemäß § 25 Abs. 1 der Prüfungs- und Studienordnung des weiterbildenden Studiums „Public Policy“ an der Universität Erfurt Ich versichere, dass ich die vorgelegte Arbeit selbstständig und ohne unerlaubte Hilfe Dritter angefertigt habe. Alle Stellen, die ich wörtlich oder annähernd wörtlich aus Veröffentlichungen jeglicher Art entnommen habe, sind als solche kenntlich gemacht. Ich habe mich keiner anderen als der angegebenen Literatur oder sonstiger Hilfsmittel bedient. Diese Arbeit hat weder in gleicher noch in ähnlicher Form einer anderen Prüfungsbehörde im In- oder Ausland vorgelegen. I affirm that the work I have submitted was done independently and without unauthorized assistance from third parties. All parts which I took word-for-word or nearly word-for-word from any sort of publication are recognizable as such. I did not use any means or resources other than the literature I have quoted. This work was not submitted in this or any similar form to an examination committee in or outside of Germany. Erfurt, Datum / Date Unterschrift / Signature Name (Blockschrift / block letters)