Impact of Innovation Policy on Organizations - Essay Example

?Annotated Bibliography and Innovation Policy's Impact on Organizations [ID Metcalfe, JS. 2002, “Science Policy and Technology Policy”, Policy Issues for Business, ed. Vivek Suneja, Sage Publications Ltd. In this chapter, Metcalfe first of all notes that not all innovation is scientific and technological. In fact, there is a dialectical relationship between science, technology and innovation. Many innovations are organizational or institutional changes. For example: Taylorism is a “technology” in the sense of being an artifact of human technology, but it is also a method of management and requires organizational change. Scientific research and understanding creates practical technological applications which in turn require institutional implementation and management which in turn lead to more technological change as specific implementations are made which in turn leads to more scientific change. Therefore, science and technology policy have to bear in mind that innovation is more complex than a simple model of science and technology leading to innovation. Metcalfe moves on to distinguish between types of policy and innovation, such as academic scientific research versus practical technology, and further notes that despite their dialectical interrelationship, science and technology are different things. Finally, he ties this in with economic policy. Freeman, C. 2002, “National Systems of Innovation”, Policy Issues for Business, ed. Vivek Suneja, Sage Publications Ltd. Freeman expands on the analysis made by Metcalfe by noting that innovation is inherently dynamically social: No firm innovates on their own, and technology and science are best done in systems of shared, free inquiry. Networks of governmental, scientific, educational, business and NGO innovators produce innovation over time. Freeman notes that the Friedrich list, a system whereby Germany specifically tied industrial and technological policy in the arena of education, was highly efficacious. He also notes that in Japan, R&D and business are tied together specifically, while in Russia, R&D and enterprise were often quite distinct. However, he does note that the Soviet Union's R&D and scientific research was not bad by any stretch of the imagination: They focused on arenas like mathematics, military innovation and space travel. This indicates that the priorities of national policy have direct and indirect results on atmospheres of innovation and creation. Freeman concludes by arguing a) regional and local factors will remain important in any technology and innovation policy no matter how globalized and integrated the world becomes, and b) Britain's experience should lead policy-makers to conclude that while learning by doing and interacting are important, innovations needs to be stressed at a systemic level. Porter, ME. 2002, “The Competitive Advantage of Nations”, Policy Issues for Business, ed. Vivek Suneja, Sage Publications Ltd. Porter continues in Freeman's vein by analyzing what makes nations competitively advantageous in the global marketplace. Strong investments in science and technology, a skilled workforce, government support and culture are all good elements, unsurprisingly, but Porter argues that in fact challenges can be opportunities. A country facing competitive challenge at home and abroad, difficult and selective customers, and aggressive suppliers will be highly effective if it can survive the challenges and weather the storm. Aside from noting the influence of national playing fields created by national policy, Porter also recommends that firms, even if they are local or nationally oriented, should adopt a global perspective and strategy, and should move towards trying to sell under their brand name globally and control their business directly even on the global level rather than using middlemen. Porter also notes that, since markets change so rapidly, they are likely to obviate and make advantages obsolete, so companies need to treat even presently relevant advantages as soon likely to be obsolete and prepare to capitalize on them quickly. Under Porter's four determinant diamond-shaped graph, the four important attributes are factor conditions, demand conditions,related industries and firm structure, strategy and rivalry. Lall, S. 2002, “Imperfect Markets and Fallible Governments: The Role of the State”, Policy Issues for Business, ed. Vivek Suneja, Sage Publications Ltd. Lall discusses the role of fallible governments in imperfect markets. In Lall's view, some market failures are to be expected and might not be extremely problematic. He notes that there are risks as well as benefits to government intervention, and argues that government intervention need only occur when the need is obvious and immense, where the market failures are sufficient to retard progress. He notes that in the neoclassical theoretical approach, firms have unlimited knowledge of the future in perfectly competitive markets and inefficiencies are only due to poor planning or government intervention. Learning curves are short and predictable. This is, of course, an absurd estimation of the world: The mythical manhour alone shows that learning curves and implementation is not a simple, scale-invariant enterprise. Thus, in contrast, Lall discusses the capabilities approach, wherein learning curves are not simple or easy and mastering and using technology requires a process of innovation and implementation. Further, unlike the neo-classical model, there are capabilities and infrastructure that has to be built before things can be done, whether in developing nations or emerging companies. Analysis It is estimated that the vast majority, perhaps up to 95%, of innovation in the drug industry occurs in the public sector, in universities primarily (Angell, 2004; Lehman, 2003). R&D expenditures at Big Pharma count for a tiny fraction of their expenditures, far less than advertising. In fact, in general, most of the countries and companies pushing the values of intellectual property did not follow them during their heyday (Palast; 2004; Chomsky, 2002; Baker, 2009). Containerization, computers, agriculture, biotech, airplanes... most of the competitive sectors of the US economy were or are publically funded, not to mention bailouts like the Goldman-Sachs peso bailout or the bank bailout (Chomsky, 2002). The most competitive sectors of the economy had publicly subsidized risk and private benefit. This is grotesque. Freeman (2002) and Porter (2002) are right that there should be a connection between NGOs, government, universities and the rest of society: We all benefit from innovation, better products and new social forms caused by things like the Internet. And Lall (2002) is right to point out that government intervention has costs that may make those interventions problematic even in an imperfect market. But companies have embraced a perverse norm: All for me, none for you. They want DRM protection and the ability to have their customers sign colossal hundred-page EULAs while they do not have to provide replacement discs as would fit a license or fully disclose at the time of sale. Producers want the benefits of monopoly protection with no responsibility, no assumption of risk for the public sector research they benefit from, etc. Based on my review of the above literature and scientific, technological and innovation policy literature, scientific, technological and innovation policy currently tend to be anti-consumer and anti-population and pro-producer: This is an unsustainable equilibrium and harmful to companies in the long term since it eventually will scuttle the innovation they benefit from and has prompted piracy and revolts against their norm that are problematic in the extreme. Companies need to embrace unilaterally institutional policies that give back to customers for the benefits they have asked for and gained from societies. The public atmosphere and policy climate are pro-producer in many ways. First: Instead of the former system of a process patent, where an individual process to make something like a drug could be patented but not the drug itself, there are now product patents that make it so that the whole drug can never be produced by someone else. This is inexcusably limited: It means that if a pharmaceutical company produces a more efficient way of making the drug, they cannot legally produce it. This leads directly to death in the Third World, and in fact such anti-innovation elements are so onerous that Baker (2009) argues that it likely eclipses the entire benefits of free trade! Companies may have secured this right, and the right may be justifiable in some instances, but it is in their best interests in the long term to not use the right too fastidiously. Companies, as Freeman, Porter and Metcalfe (2002) would suggest, should embrace the idea of innovation being social, shared and based on free inquiry, and make sure to release their intellectual property as soon as possible in order to prompt innovation. Licensing schemes, for example, could allow them to continue to make profit off their patent while not abusing the generosity of the public. Second: These patents are allowed to be made even when the vast majority of the research was done in a public institution. A company can, in essence, take all of the principles and research of a public institution, synthesize the final product at 5% of the manhours, and then gain the exclusive public benefits of it. Doing so harms their public image, though, and discourages public innovation. Companies should make sure that, when they are using public resources, to give back to the public: Give credit to the original researchers, give endowments to the community, make sure to release as much of their information as possible to empower further research, etc. Third: Companies benefit from industrial policy and subsidies. Companies have embraced DRM approaches to protect their intellectual property, but the problem is that, for most products, DRM is impossible (Young, 2009): “...[W]e're just stopping people from copying data, right? That's just... [c]ryptography... But here is the super-secret truth for all your armchair cryptographers: It's impossible... impossible in the same way that giving yourself a piggyback ride is impossible” (2009). It may seem like a bold claim, but the reason is simple: Ultimately, every element of a product, if it is going to be run, must eventually be released into memory, the locks taken off, and once that occurs, it is trivial to take it and run with it. Gutmann (2007) in his review of Windows Vista notes that “In order for content to be displayed to users, it has to be copied numerous times...[I]f you're reading this document on the web then it's been copied from the web server's disk drive to server memory...copied into main memory, copied to your browser's disk cache, copied to the browser's rendering engine, copied to the render/screen cache, and finally copied to your screen [in this case, the sentence was then copied into a word document, uploaded, and again copied several times]. Windows Vista's content protection (and DRM in general) assume that all of this copying can occur without any copying actually occurring, since the whole intent of DRM is to prevent copying”. Gutmann goes so far as to say that preventing copying is against the laws of physics! In order to embrace this quixotic, impossible way to protect their property, producers have undermined their EULAs by requiring customers to sign up for rootkits and DRM means that by definition make their product worse than what the pirates are getting off the torrents, increased their overhead in tech support headaches, and alienated customers who don't like being treated like criminals or who feel that if they purchase a game they deserve unlimited installs on all their systems as would be the default in the market economy. Legitimate consumers bear the headaches of installing long CD keys, having forced Internet authentication to play their game, etc. Pirates avoid all this, and there is some evidence that too much DRM causes a backlash: Kee (2008) notes that Spore, one of the most onerous games as regards DRM, was also first-day cracked. Further, as Young (2009) notes, companies are transparently not doing their basic due diligence as regards security for their companies and monitoring their interactions with others. When a first-day or two-week-before-release game or product is released onto the torrents cracked, it is not because hackers broke in and stole it, but because someone who received an early copy for review purposes or other reasons leaked it. Companies could put a few identifying strings to prevent against the most basic of theft from those who they have a business interaction with and refuse to send them advance copies again, but they do not. When companies are willing only to externalize the costs of their security onto the consumer and onto the market while not spending themselves, it undermines the legitimacy of their position and makes the pirates and thieves look like heroes. Remember that an illegal download is not a lost sale. The pirate might have bought the game, software or song if piracy was not an option, or they might have borrowed it, listened to it or played it or used it at a friends' house, or simply gone without. Certainly many people using torrents download many things they never end up using. In order to combat potential lost sales, companies are actually willing to lose real sales in the present day. One example of leadership in this vein is Valve. Their Steam digital distribution platform provides plenty of carrot to go along with the stick. They offer cheap sales of old games, games that by this point are not likely to be purchased at the $60 price point other companies stubbornly insist upon. They allow unlimited installs on any computer, act as a backup now and in perpetuity, have offline modes for people on the go, and provide utilities like social networking and a built-in store. Steam may not be perfect, but it has provided enough to compensate consumers for lost rights to be much-beloved in the gaming world. Other companies need to follow Valve's lead, and give their consumers and communities things of value to compensate them. The music industry learned after Napster that preventing piracy of their music was impossible, and cracking down on grandmothers and ten year old children didn't increase their sales or recoup their money. Instead, they tried to embrace an alternative at a lower cost: ITunes, for example. Companies are certainly benefited by the current climate, but if they use the rights they have gained irresponsibly, they will undermine innovation, hurt the Third World, scuttle their PR and alienate consumers. Companies need to instead embrace the idea that the rights they have gained entail responsibilities and make that part of their mission. Works Cited Akester, Patricia. 2009,Technological accommodation of conflicts between freedom of expression and DRM, University of Cambridge, July 7. Albert, M. 2003, Parecon: Life After Capitalism, Verso Publishing. Angell, M. 2004, “The Truth about the Drug Companies”, New York Review of Books, July 15. Available at: http://www.nybooks.com/articles/archives/2004/jul/15/the-truth-about-the- drug-companies/ Baker, D. 2009. “Envisioning the Future Requires Knowing the Present”, Z Net, June 21. Center for Information Technology Policy. 2006, “Lessons from the Sony CD DRM Episode.” Princeton University. February 14. Chomsky, N. “Interview”. Imagineer Magazine. May 19, 2009. Chomsky, N. Understanding Power. 2002. Gutmann, P. “A Cost Analysis of Windows Vista Content Protection”. June 12, 2007. http://www.cs.auckland.ac.nz/~pgut001/pubs/vista_cost.html#effect . Accessed September 8, 2009. Kee, T. 2008, “EA Admits Spore Launch Botched by DRM; Still, Financial Damage Already Done”. PaidContent.Org. September 19. Lee, T. 2005, “Circumventing Competition: The Perverse Consequences of the Digital Millenium Copyright Act”. CATO Institute. March 21. P2P.Net. 2007, “DRM 'violates Canadian privacy laws'”. September 18. Available at: www.p2pnet.net/story/13358\ Lehman, B. 2003, “The Pharmaceutical Industry and the Patent System”, Intellectual Property Institute. Palast, G. 2004, The Best Democracy Money Can Buy. Penguin Books: London. Sands, Sean. 2009, “DRM: An Industry Changed”. The Escapist. February 7, 2007. Accessed September 10. Schneier, Bruce. 2005, “Sony's DRM Rootkit: The Real Story”. Wired.Com, November 17. Available at: http://www.schneier.com/blog/archives/2005/11/sonys_drm_rootk.html Ulaby, N. 2005, “Sony Music CDs Under Fire from Privacy Advocates”. NPR. November 4. Vogeley, D. 2005, “The case of Half-Life 2: Violation of consumer rights with DRM-based usage control systems”. IndiCare, November 3. Weisbrot, M. 2002, “Do As We Say, Not As We Did”. Counterpunch. June 14. Available at: www.counterpunch.org/weisbrot0614.html. Wired. 2007, “Napster Trial Ends Seven Years Later”, August 31. Young, S. 2009, “The Impossible DRM”. The Escapist. April 3. Read More