National HR strategies in a global context

1
National HR strategies in a global context

• Luc Soete
• UNU-MERIT,
• University of Maastricht
• The Netherlands

OECD/Germany workshop on Advancing Innovation
human resources, education and training, 17-18
November 2008, Bad Honnef
2
Outline

• Alternative HR models between firms and
  countries underlying reasons
• Convergence between the two models of learning
  because of globalisation, lessons from Europe
• Global international education challenges
• Financial crisis and knowledge investments

3
1. Human Resources and the Knowledge economy
back to Schumpeter

• Useful to start from the old Schumpeterian
  distinction between the Schumpeter model I and
  Schumpeter model II innovation.
• Schumpeter I model
• Entrepreneurial model innovation as the basis
  of new firm foundation (ICT, biotechnology)
  individual inventor-entrepreneur, science based
  firms, blue angel/venture capital, importance of
  exit framework (functioning stock market, failure
  tolerance).
• Schumpeter II model
• Incremental innovation model stepwise
  innovations based on continuous accumulation of
  (tacit) knowledge role of learning internal
  human resource investments professionalized RD
  labs in large firms.
• These two models represent two different models
  of learning and HR management within firms and
  societies.

4
Dominance of two models in way firms operate at
country aggregate level

• Schumpeter I model
• USA
• Canada
• Australia
• Ireland
• Great Britain
• China

• Schumpeter II model
• Germany
• France
• Benelux
• Scandinavian countries
• Austria
• Japan

5
With major underlying labour market and HR
differences

• Anglo-Saxon model
• Easy hiring and firing
• Shorter contracts
• Modest unemployment benefits
• Weak trade unions
• Labor relations are more conflictuous
• Wage bargaining de-centralized

• Rhineland (Japan) model
• Protection against firing
• Longer stay with same firm
• More generous unemployment benefits
• Strong trade unions
• Labor relations are more co-operative
• Wage bargaining co-ordinated and centralized

6
Reflected in real wages differences (1960 100)
7
Not in terms of real GDP growth (1960 100)
8
Strongly in labour productivity (value added per
hour worked) (1960 100)
9
In labour input (working hours) (1960 100)
10
And in capital intensity of production
(capital/output) (1960 100)
11
Traditional reasons for lower labour productivity
growth

• Negative effects of flexibilization of the labour
  market (shorter job duration)
• Less loyalty and commitment (firm secrets and
  technological knowledge can more easily leak to
  competitors)
• Historical memory of the learning organization
  suffers from frequent changes in personnel
• Manpower training is less attractive (short
  pay-back period)
• Strong growth of management functions for control
  and monitoring due to loss of trust and loyalty
  (frustrating for creative people)
• De-centralized wage formation workers may
  appropriate part of the monopoly profits from
  innovation
• Continuous accumulation of incremental knowledge
  in a Schumpeter II innovation model is suffering
  from frequent changes of personnel

12
2. Knowledge on the move an industrial research
past?

• Strong focus on industrial RD a phenomenon,
  characteristic of the industrial revolution.
• Long before going back into the 19th Century,
  experimental development work on new or improved
  products and processes was carried out in
  ordinary workshops
• Technical progress was rapid then but techniques
  were such that experience and mechanical
  ingenuity enabled continued improvements to be
  made as result of direct observation and
  small-scale experiments and improvements.
• Distinctive feature about modern, industrial RD
  its scale, its scientific content and the extent
  of its professional specialisation

13
Characteristics of new technological change

• Clear shift in the nature of knowledge
  accumulation from industrial, tight to more
  undetermined outcomes, trial and error ST
• Traditional industrial RD was based on
• Clearly agreed-upon criteria of progress and
  ability to evaluate ex post.
• Ability to hold in place, to replicate, to
  imitate.from laboratory conditions to industrial
  production
• A strong cumulative process learn from natural
  and deliberate experiments.
• New technological change appears more based
  upon
• Flexibility, hence difficulty in establishing
  replication.
• Trial and error elements in research with only
  ex post observed improvements, difficulty to
  evaluate.
• Problems of continuously changing external
  environments over time, across sectors, in space.

14
Users as innovators

• Particular role of users in the RD process
  itself
• From technically skilled, bèta users (as in
  workshops) to simplicity in use
• Underlying process of democratization of
  innovation (Eric von Hippel)
• Particular role of SSH in providing research
  insights into users
• not just with respect to industrial research
  output
• but also in particular with respect to service
  delivery
• Particular role of ICT with respect to
  interactive services (e-business and
  e-government)
• European diversity of users comparable to a long
  tail of diversification?
• SSH research appears essential in many areas of
  meta social transformations
• Knowledge society, sustainable development,
  mobility, migration, etc. where tight
  industrial ST solutions will not do.

15
Two forms of HR learning

• The Schumpeter I model is characterized by the
  so-called Science-Technology-Innovation mode of
  learning (Bengt-Ake Lundvall), characterised by
  the dominance of the science-approach i.e.
  formalisation, explicitation and codification
• The Schumpeter II model is characterized by
  Learning by Doing, Using and Interacting. It
  refers to more experience-based, implicitly
  embedded and embodied knowledge.
• The old view of a UK/European Paradox Systems
  with a lot of good domestic science but less
  successful in innovation reflects by and large
  focus on STI, neglect of DUI.
• Today rather the opposite paradox?

16
Globalisation HR challenge a double change in
context

• Access to elements from the science base becomes
  increasingly important for firms in all sectors
  calls for a strengthening of Schumpeter mode I of
  dynamics
• Entry of new high tech firms (grow or go)
• Most firms employ large amounts of personnel with
  academic/technical degrees in natural science,
  engineering, and SSH
• Firms interact more closely with researchers
  attached to universities or other public
  research institutes.
• But these changes contribute to accelerating
  change and callsfor a strengthening also of the
  Schumpeter mode II of learning
• Interdisciplinary workgroups
• Quality circles/groups
• Systems for collecting employee proposals from
  employees
• Autonomous groups
• Integration of functions

17
3. European higher education challenges

• In the EU, the case could be made that as in the
  case of trade diversion, a side effect of
  economic integration on HE and research
  activities within the EU has been intra-European
  knowledge diversion.
• Gradual move from national to European borders
  Bologna, ERA, ERC most easily compared with a
  research single market with as yet though very
  limited mobility, let alone any structural HE
  institutional change.
• More concentration of research (not more
  students) needed 200 US research universities,
  how many in Europe? Need for more differentiation
  (e.g. focus on graduate students) amongst higher
  education establishments
• Increased autonomy and selectivity in admissions
  (US and Asian examples), more inter-disciplinarity
  , changing mindset of students and staff, more
  flexible employment regime

18
Schumpeterian HE challenges

• Need for reform in European HE system in
  direction of excellence (cost of social
  cohesion), specialisation, mobility alongside the
  lines of the Schumpeter mode I view
• At the same time and at both research and HE
  level, Europe has many high quality large
  multilateral research and post-graduate research
  organisations CERN, ESA, EMBL, and national
  organisations CEA, Max Planck Gesellschaft, TNO,
  IMEC, Fraunhofer
• Little cross-country learning of the Schumpeter
  mode II sort often because of lack of critical
  mass, few mergers
• Schumpeter mode II learning based on strong
  localised learning features with links to
  universities and regional smart specialisation
  based on particularisation

19
4. Current financial crisis Short term impact on
RD

• The current financial crisis is likely to
  influence private RD investments in a number of
  ways
• The negative impact on profitability leads to a
  focus on most innovative segments of production
  at the expense of lower value added segments
• Within the RD portfolio, focus will be on most
  promising development areas at the expense of
  longer term, more risky projects.
• At employment level, likely to be labour hoarding
  in RD firing of flexible temporrary employment
  in production
• Paradoxically, the deeper the recession, the more
  likely Europe and the Netherlands might be coming
  nearer to the 3 RD/GDP target in 2010!

20
Longer term impacts outsourcing

• In the longer term though, a renewed focus on
  possibilities of increased international and
  domestic outsourcing of RD so as to further
  reduce RD costs
• More outsourcing of development parts to cheaper
  locations
• Outsourcing of existing private RD
  infrastructure to local/national authorities as
  common, public open innovation infrastructure
• Increasing amount of basic RD activities
  outsourced to (porfessional) universities

21
Onshoring and smart specialisation

• Distinction between public and private RD
  investments becomes less relevant, search is on
  for synergies
• Offshoring from private to public, public private
  partnerships between universities, (semi-)public
  research institutions, private firms
• Onshoring from private and public attracted by
  similar locational facilities
• Emergence of smart specialisation clusters
• From a research perspective globally linked and
  networked,
• From a financial perspective based on smart
  investment in locational infrastructures acting
  as physical attractor for onshoring of RD
  activities.

22
A new Global Knowledge Keynesianism?

• The current fire prevention of governments in
  financial institutions, with the temporary
  (partial) nationalisation of large national
  banks, raises questions about stronger local
  financial involvement in knowledge investments
• Could the new financial nationalism in Europe
  be considered an anchorage instrument for the
  localisation of international knowledge
• In HE, international outsourcing and twinning
  with Southern partners as new form of more
  organisationally embedded international
  partnership
• Imagine about 50 universities and professional
  universities in the Netherlands, about a similar
  number of research institutes
• Formal twinning will need to be coordinated by
  whom?
• True internationalisation of research and higher
  education

23
Recherche sans frontière

• Global research issues should become fully
  integrated in all applied research and HE in the
  developed world. Become core part of research and
  higher education institutions within an open
  research without borders environment..
• At HE level integration in curricula and research
  activities of university and high school
  departments of global challenges
• At research level, global development involves
  broadening the scope of research activities to
  include more systematically all users groups
  (BoP), and in particular various communities of
  practice. Involvement of those groups appears
  increasingly essential for successful innovation.
  
• Particularly with respect to applied research,
  including design, the possibilities of such
  collaborative innovation processes will have to
  involve much stronger collaboration,
  interactions, and partnerships with research
  communities in developing countries.