Book Reviews
Innovation and Knowledge Creation in an Open Economy: Canadian industry and international implications
John R Baldwin and Petr Hanel
ISBN: 978-0-521037-13-6 2007 542 pages Cambridge University Press
Garrett Upstill
School of Business, University of New South Wales (ADFA College), Canberra ACT
John Baldwin from Statistics Canada and fellow economist Petr Hanel have made a valuable contribution to the innovation literature with their comprehensive study of the Canadian manufacturing sector. They draw on a rich source of data in the innovation survey conducted by Statistics Canada in 1993, and they do it full justice. From their book emerges a fascinating picture of the Canadian innovation system, of its actors, sources of information, networks and outputs and how the parts fit together.
With national innovation surveys we have the opportunity to move beyond simple tools such as R&D data, patents or case studies in analysing national innovation systems. Indeed the 1993 Canadian survey was designed specifically for this purpose and extends the approaches set out in OECD Oslo Manual and adopted in the European Innovation Survey. Canvassing the entire population of manufacturing firms, the Canadian survey collected information on companies which introduced a new product or process during the period 1988-91 (about one-third of the total) as well as information on the innovations themselves, with each innovating firm reporting on a major new product or process introduced during the survey period. These were classified into three types, about one-sixth of innovations reported being 'new to the world', one-third 'new to Canada' and one-half 'new to the firm'. The differences in the innovation regimes which lead to these different types of innovation is one of the topics investigated in this book.
The survey relied on self-reporting of R&D and consequently cast a wider net than obtained with strictly applied Frascati definitions. About 65% of firms reported R&D activities during the survey period, with the number of firms conducting R&D on a continuous basis or claiming tax R&D tax credits being less than half of this total. Baldwin and Hanel explore the different patterns of firm behaviour revealed in the R&D and innovation data, and distinguish the different behaviour of firms in 'Core' manufacturing sector (machinery, electrical, chemicals, pharmaceuticals, instruments, petroleum refining ), which is responsible for a disproportionate number of innovation, from Secondary and Other manufacturing sectors which absorb them. In this they adopt the taxonomy pioneered by Robson, Townsend and Pavitt (Sectoral patterns of production and use of innovations in the UK: 1945-1983, Research Policy (1988 [17(1): 1-14]) for the UK and US manufacturing sectors.
Complementary aspects of the Canadian innovation system are addressed in different chapters against a background discussion of the key issues and the broader international literature. Chapters are dedicated variously to the sources of innovation, the different patterns of innovation in small as opposed to large firms, the differing uses of property rights to protect innovation, the financing of innovation, the transfer of technology between firms and joint ventures, the role of multinationals, and finally the extent to which innovation relies not just on new knowledge but also complementary competences in engineering, access to capital human resources, and marketing.
In their treatment of internal sources of innovation Baldwin and Hanel find non-R&D factors such as management, marketing and production also to be important as providers of ideas. They find classical spillovers, mostly from competitors, to be an important external source of ideas in about half the cases of reported innovation: more important still, though, are market partnerships with suppliers, customers or other firms. On the topic of multinational companies, their analysis refutes the notion that foreign subsidiaries contribute to truncated development of innovation in Canada. The evidence, based on an analysis of the organisation of R&D, the sources of ideas, and the incidence and effects of innovation points the other way. While it appears some firms act like branch plants and have little engagement with the local industry environment, collectively multinational firms have patterns of collaboration similar to those of Canadian firms and indeed innovate in all sectors more than their local counterparts (although closer analysis shows the latter differences to be largely accounted for by differences in size and competencies)
The book is well presented and Baldwin and Hanel deserve credit for a thorough, well considered and revealing analysis of the Canadian system which will stimulate interest well beyond their shores.
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