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EUROPA - Research and Innovation: What's New in Innovation

Friday, May 24, 2013

Innovation often misunderstood, says B.Guilhon_ Some of the ramifications of pretended misunderstandings and misinterpretations are presented below based on B. Guilhon of SKEMA Biz School article-book review in Le Monde

When Innovation is taken into Hostage! by Bernard Guilhon. Translated from Le Jounal, Le Monde

The Economy as an (unbelievably simple) Software Programme - 
[simplified for the sake of argument or book reviewing by Le journal Le Monde(in French)?]

Guilhon pretends (pure supposition?) that many economists and public decision makers(?) in France at least,wrongly believe that it is sufficient "to pull the levers" or "oil the springs" of an economy based upon knowledge,  the so called "knowledge economy." In doing so the flow of innovations will be constantly fed an thus the country (France) will maintain its position in the worldwide economic competition.

However the loss of export market share questions the above definition of the innovation process?

Guilhon, as reported in Le Monde, further maintains that the economic crises is a crises of how economies are thought of, defined. For the European countries (EU?) the crises started which started in 2007-2008 is not a financial crises but a crises due to the deindustrialisation hitting,especially,countries which have neglected to strengthen their industrial base.

He continues to chastise "the established view" for its lack of interest for industry (NB. often relatively hard and dirty work despite modern efforts in quality, health and environmental protection in developed countries) Such lack of interest, could he possibly mean low ROI-Return on Investment interest? leads him to use the expression "schizophrenic" concerning the "reigning - panicked" vision of innovation which places "great" value on the production of new knowledge without the desire to seek and implement the opportunities for applications of the said knowledge. Here I must remind the unwary reader and some economists of well known cost  comparisons: If the lab experiment cost is unity, a pilot scale up is 10 times more and a full industrialisation is 100 and that is probably a very conservative estimation.

That innovation is not seen as a transformation of ways of thinking and acting whose consequences provoke the downgrading of products and processes requiring reallocation of competences towards sources of creativity. Really! The guys involved don't know this! But at what cost & to whom?

He carries on R&D bashing as a process of increasing and preservation of scientific progress (over)-fed by pubic spending in R & D and in the creation of knowledge-intensive employment whose main motivation is to validate our main paths of excellence intellectual.

Thus progressively the economic machine looses its vitality (best people, brain drain and what have you)

In France:
1. Ageing of industrial equipment
66%  or 2/3 of all Companies have not sent any equipment to the scrap heap between 1990 and 2006-2011,
2. France has installed 15% less robots than Germany in 2011. (Popn. France/Germany roughly 25% less!     (Try again Prof. Guilhon).
3. France is classed 29th in the world for investment in information technologies.


Constraints due to globalisation are claimed to be under-estimated whereas the violence of the shocks taken require longer recovery times.

Employment has dropped continuously over the last 24 months. In the last 6 months, INSEE - National Institute for Statistics and Economic Studies. indicates that unemployment has lowered on only 8 occasions while the level of  economic activity has remained inferior to the level in 2008.

ILO-unemployment rate
Monthly industrial Production indexes
NB-REM:There are 4 levels of economic activity (link) the main reference used by INSEE in France is GDP.

This unemployment produces an erosion of qualifications and tacit or "hands-on" knowledge of the the work-force, a disapprenticeship due to lack of practise, somewhat in contradiction with the basic building block of an economy supposed to be based on knowledge, in this case "Learning by Doing".   This loss of substance in the industrial sector not only deepens foreign debt but does so by replacing industrial work by lower paid work in the service sector.  

R and D policies,(presumably government policies) Guilhon claims, are inappropriate to aim to support companies most exposed to international competition ie. small to middle sized companies are the ones that loose out, while the large companies preoccupied by rationalisation (presumably to increase efficiency and profit ) and implantation close to large attractive markets allocate increasing investment R and D out with Europe (I suppose this means truly democratic Europe, the European Union) 
(NB. including cheaper, equally qualified and maybe less industrially wise although my latter comment may just be wishful thinking).

In this context R & D spending (investment) by industry represents 63% of total R & D spending.

Such weakening of industrial activities and accompanying delocalisation has, according to the US economist Gregory Tassey, a devastating effect on the R and D capacity of the (national) economy which in turn weakens the (Nations) global innovation infrastructure.

 Education and training
Guilhon criticises Education and training. He claims that under investment in Western Europe leads to a penury of qualified work, evident in many sectors (the book review does not say which sectors nor other evidence).

Delocalisation he qualifies as "shadow migration" allowing the "home" country to benefit from qualified productive factors while renumerating them at (lower) welcoming rates.

A LOOSER-LOOSER GAME (A FOOLS GAME when we know the high quality of education and the positions of those targeted,! Strong words indeed ) 

When qualified work moves the European schema appears to reproduce some aspects a Looser-Loser (L-L) Game as opposed to  Win-Win (W-W) play. This L-L game appears to characterise the relationship between  the developed countries and the developing countries 

Countries that export qualified labour (southern Europe) are expected to invest less in education whereas qualified labour importer countries would tend to do the same thing, not invest in education since they can depend on the investment of other countries.

Thus globalisation requires a systems vision of innovation, which requires simultaneous investments in strongly related complimentary actives: new technologies, human capitol, communication technologies, intellectual property legislation, valorisation structures.(I guess this specialist & many others do not follow this blog -I have only 2 followers to date- other wise Innovative issues such as Innocentive incredibly instructive Prof Guilhon.) 

On a global scale, identification of winners and losers depends on a much more detailed classification of the type of tasks done and it is difficult to predict what will be the exact consequences produced.

When the price of certain tasks is no longer set by a local market but by the global market ie. when the service given becomes interchangeable, the ratio salary/productivity (for equal skills) risks to sway in favour of geographical delocalisation of such tasks on an international scale. In this context, the most highly qualified tasks are not necessarily protected! (eg Innocentive's global approach to highly skilled Innovation)

Innovation remains handicapped by the "bonus of the existing product or service" which applies to the already installed productive base. Such down-grading produces losses and makes productivity gains uncertain. Added this innovation handicap Guilhon invokes a certain conservatism in economic judgements, preferring the existing or known to the unknown.  

Guilhon the climate skeptic and R and D bashing again to which he may be interpreted as adding world renowned climate expert bashing.  

Many (economists) diagnose the end of the the current energy (production and consumption) model

Whether this pleases them or not, he says, the current upturn of the american economy is not related to the production of new knowledge but a regain of competitvity by a falling dollar and a substantial reduction in the cost of (NB. dirty energy production & consumption) obtained by applying the (most modern) technologies of shale gas and oil extraction already ancient (1948! (NB 1. The USA is not an example to follow  in all things far from it, eg home arms control, the cowboy, hit it see if its still standing mentalities, arguably still pervades at least some of strates of american life and attitudes.  2. The technology: Guihon is refering to has known much and improved knowlegde and much improved techniques (innovations) but is truely a technology fraught with risk and in no way responds in a responsible way to counter the now well known effects of GHG-CC. One would expect economists not only to understand and decipher not only current economic result and deviation from prevision, but also,to plan with financial backing, for the future. A great start was made several years ago by the Stern Report "long since forgotten?

PS. Having made several comments without reading Guilhon's book perhaps I should read it but this review from Le Monde has not encouraged this step.

MOREOVER-To Get a real feel for Industrial Restructuring and Delocalisation try some of the following links on Glasgow Scotlands Forced Approach (The country of my birth was far from the centre of power in UK, London.
1945 at the end of WWII, 23 shipyards on Glasgow's Clydeside - latterly only 1 Norwegian-Kvaerner and a Yacht builder!
The story goes on concerning steelmaking closures, Integrated Mills near Ship Terminals,
and disloyal delocalisation notably a US Pharmaceutical Plant from Scotland to Luxemburg while I was still a student at University and closures at ICI Imperial chem Ltd due to World Wide overproduction of Nylon then later Silicon (both plants in Ardrossan, Ayrshire Scotland are long closed.


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