Knowledge flows of innovation in small open economies

Knowledge flows of innovation in small open economies – A comparison of Ireland Singapore Nola Hewitt-Dundas Queen’s University Belfast Annette Singh, Yuen-Ping Ho & Poh Kam Wong National University Singapore

Focus of the Investigation • • Measuring Intangibles Creation and diffusion of technological knowledge Two small open and successful late industrializing countries Indigenous technological capability is weakly developed in both countries – contrast to other small open economies with large homegrown technology-based firms (Finland, Netherlands, Switzerland), or countries with high intensity of knowledge flows among innovation actors (Denmark) Ireland Singapore GNP as % of GDP (2008) 85. 0 70. 7 Exports (% of GDP 2008) 47. 5 185. 2 / 34. 7 Manufacturing (as % GDP 2008) 21. 5 19. 2 1. 43 / 1. 68 2. 77 / 3. 91 R&D Spend (as % GDP / GNP 2008)

GDP per capita (Current US$) 1960 -2010 70000 60000 50000 SG GDP per capita (current US$) 48 423 46241 40000 IR GDP per capita (current US$) 30000 20000 19 60 19 62 19 64 19 66 19 68 19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00 20 02 20 04 20 06 20 08 20 10 0 Source: World. Bank Data: http: //data. worldbank. org/country/ireland; . . . /singapore

19 76 19 77 19 78 19 79 19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 GERD as Percentage of GDP, 1993 -2010 3 2, 77 2, 5 2 1, 5 Ireland. GERD as % GDP 2, 14 Singapore GERD as % GDP 1, 8 1, 43 1 0, 5 0

Business R&D as Percentage of GDP 2, 50 Ireland BERD as % GDP 2, 00 1, 99 Singapore BERD as % GDP 1, 50 1, 3 1, 19 1, 00 0, 50 0, 00 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Higher Education R&D as Percentage of GDP 0, 70 0, 60 Ireland HERD as % GDP Singapore HERD as % GDP Percent of GDP 0, 50 0, 52 0, 40 0, 39 0, 38 0, 35 0, 31 0, 30 0, 27 0, 26 0, 30 0, 27 0, 29 0, 23 0, 20 0, 26 0, 23 0, 24 0, 20 0, 10 0, 00 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Knowledge Creation - First Patent Awards, per annum 1200 1000 Total Number of Irish Citing Patents Per annum 800 653 Total Number of Singapore Citing Patents Per annum 600 506 400 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979 1978 0

Knowledge Creation (2) Cumulative share of patent awards by assignee (1976 -2009) Ireland Singapore Local Indigenous & Local Sub Local Uni/PRC Foreign Ind. Foreign MNC with Sub Foreign Uni/PRC

Primary Question: Are MNCs important in the knowledge sourcing and technological knowledge accumulation activities of indigenous businesses? Secondary Question: Do MNCs benefit from technological knowledge generated in indigenous firms? Externalities from FDI 1. RTDI Policy – attracting more knowledge intensive activities of FDI 2. Evidence of localization of knowledge (esp. basic) – suggests significant potential benefit from attracting MNC R&D activities. 3. the exclusive relation between geographical proximity and knowledge exchange is no longer valid

Data & Methods • Construction and analysis of two databases – patents granted 1976 -2009 by USPTO and EPO • Citing Patents and Cited Patents (self-cites excluded) USPTO Cited Patent: ‘If patent B cites Patent A, it implies that patent A represents a piece of previously existing knowledge upon which patent B builds, and over which B cannot have a claim’ (Hall et al 2002, p. 417)

Citing - Cited Patent Pairs 43, 062 3, 275 47, 413 3, 934 Cited Patents Citing Patents Ireland Singapore

Technological Knowledge Flows – Ownership of Patents cited by Local Indigenous Businesses

Technological Knowledge Flows – Ownership of Patents cited by MNCs with Local Subsidiary

Technological Knowledge Flows – Ownership of Patents cited by Local Universities/PRIs

Key Points 1 – Both countries • Clear limitations of this approach – patents reflect a type of firm, sectoral biases and specific innovation strategies • Primary contribution of patents to innovation may be through their facilitation of knowledge-coordination between firms rather than their more direct technological effects (Penin, 2003) For both countries, knowledge flows within MNE sector dominate – (i) evidence of spatial constraints to knowledge flows (ii) appropriateness of policy to target specific sectors and likely to contribute to embedding of MNE sector Limited evidence of success of policy to build public sector capability as a means of strengthening innovation links with MNEs.

Key Points 2 - Singapore • Singapore – Knowledge creation and diffusion is dominated by MNEs suggestive of an independent ecosystem with some spillover (uni-directional) to local business and universities/PRIs. • Singapore MNE and Indigenous organisations display ‘commensalistic’ relationship. How embedded is the MNE sector? How susceptible is it to shocks?

Key Points 3 - Ireland • Ireland – National knowledge flows are weaker • Irish MNE and Indigenous firms – knowledge flows exist however overall pattern is less concentrated nationally – more distributed internationally • MNE-indigenous relationship is less commensalistic and ‘very’ slightly more symbiotic • Does this reflect slightly higher technological capability of Irish businesses? • Reflect geography of global value chains? • Due to Technological Complementarities? • How does distance moderate the efficiency of knowledge flows? • Singapore – potential for overembeddedness? • Ireland – evidence of embeddedness but diversity of knowledge sources – Quality impact?