Level of RD intensity and economic prosperity

22 Forum Tahunan Pengembangan Iptek dan Inovasi Nasional V, Tahun 2015

2.2 Cases study evidences

i Innovation in capital goods firms Product innovation in Indonesian capital goods firms are conduted as the improvement of existing machineries products. It is the results of informal learning without conducting formal RD activity to create minor innovations, which is ‘new to the firm’ innovations — rather than ‘new to the market’. The innovation is stimulated by the limited co-operative arrangements by producer, supplier and consultant. The producers-users interaction are in the forms of exchange in goods and information as well as cooperation to stimulate innovation. Some cases of upgrading machines and related technologies in capital goods firms are as follows: i co-development of new machines by users-producers interaction, i.e. the modification of Fluidized Bed Combustion technique; ii collaboration between user-producers in upgrading or customizing standard machines, i.e. supplying control panel; and iii development of new machines, equipments and tools, i.e. development of Nozzle Air Distributor, power plant, passenger boarding bridge and medical device USG. The main driver of technological learning in the capital goods firms is the vision of top management. Aminullah, 2014 ii Innovation in natural resource based firms Some natural resources based firms has conducted product innovation driven by internationalization of production network through outward FDI. The natural resouce based MNEs are in the areas of foods and natural cosmetics. The MNEs have developed their owned knowledge capability then transferred and adapted the knowledge to host countries. The firms conduct product innovation with RD activity, either with intramural or extramural RD. A large food firm does not has its own RD facilities and generally conduct product innovation through extramural RD by collaborating with other innovation sources, such as universities and research institutions. The food firm provides full RD financing and buy the intelectual property on the product inovation conducted by universities.While annother food firm has invested in RD facility and allocated intramural RD financing for developing new product innovation. Then, the natural cosmetic firm has grown from a small firm to a large firm then expanded to MNEs by developing various product innovation with internal RD activity. Aminullah, 2013 iii Innovation in bio-based chemical firms Biobased chemical firms acquire, develop, and accumulate knowledge and technology through interactive learning among RD unit, production, marketing units inside the firms, as well as interaction with external sources of knowledge universities, research institution, suppliers, and users. The large scale of firm acquires knowledge basically through RD activities, monitoring of scientific advancement, and technology spillover, but for the small firms gain knowledge and technology through learning by DUI doing, using, and interacting inside their small laboratory. The biobased chemical firms develop technology by conducting RD activities to solve the negative environmental impact, to find effective pest control, and to improve soil fertility as well as to meet the standard of safety and security of biobased chemical products. Innovation in the biobased chemical product is driven by: i. solving the environmental problems induced by petroleum-based products, ii. finding innovative raw material supply; and iii. developing processing technology to meet the standard of safety and security in biobased chemical products. Supporting the chemical firms to interact with public RD and university is important to promote technological innovation through RD. The enabling factors of biobased chemical products innovation are the availability of scientists and researchers in university to conduct research collaboration in firm’s RD unit. Aminullah, 2015

3. RD intensity and economic prosperity

3.1 Level of RD intensity and economic prosperity

23 Forum Tahunan Pengembangan Iptek dan Inovasi Nasional V, Tahun 2015 The categorization of RD intensity and grouping of prosperity here based on the cluster of data distribution in X-Y graph with the references of “Sussex manifesto” 1970 and World Bank category 2014. The Sussex manifesto defined the target of RD intensity for developing countries 0.5 of GDP see Ely, 2009 and the World Bank category of prosperous country by high income percapita more than US 10,600. Therefore the categories of RD intensity are as follows: low less than 0.5 of GDP, medium 0.5-1 of GDP, high 1-3.5 of GDP, and very high more than 3.5 of GDP. While the level of prosperity are grouped into: less prosperous GDP percapita less than US 10,600, prosperous GDP percapita US 10,600-100,000, and very prosperous GDP percapita more than US 100,000 Levels of RD intensity viewed from economic prosperity vary by countries. The general pattern is that an increase in RD intensity in line with the increase of country economic prosperity. Most developed economies with high level of RD intensity are prosperous countries. Two countries, Luxemberg and Norway with high RD intensity are very properous countries, Two countries, India and China, with high RD intensity are still less prosperous countries. Only one country Korea with very high RD intensity is a properous countries. See Graph 4. Furthermore for the countries with moderate level of RD intensity, we identify two countries Argentina and Slovakia are prosperous countries and one country South Africa is still less prosperous country. Two countries Oman and Chile with low RD intensity are prosperous countries GDP percapita more than US 10,600. More ever, three countries Indonesia, Thailand and Philipinness with low RD intensity are less prosperous countries. In short, properous countries tend to have RD intensity more than 0.5 of GDP, while less properious countries tend to have RD intensity less than 0.5 of GDP.

3.2. Capacity to raise RD intensity