Case Study Report Executive Summary

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Case Study Report Executive Summary 3.0 Final Draft 20080107 Anders Gjoen, Mireille Matt, Laurent Bach, Klas Eric Soderquist, Luca Alessandro Remotti, Simona Cavallini, Brigitte Nones, Franziska Steyer (in order of appearance).

Changes: Reason for Changes: Authorised:

Robbert Fisher

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Executive Summary The objective of the Innovation Impact project has been to assess the impact of the collaborative RTD projects funded by the 5th and 6th European Framework Programmes for Research and Development on innovation. The study was based on four lines of inquiry and 10 more detailed research questions that allowed the project team to identify, explore and evaluate the interactions between research, technological advancement and innovation. The four lines of inquiry included: 1. Characteristics and strategies of organizations in the Framework Programme 2. Research project characteristics, project management and innovation 3. Critical micro-economic determinants of the impact of research on innovation 4. Lessons for programmes targeting innovation. Within these lines of inquiry, the case studies have focused on the following issues that to a large extent reflect some of the more detailed research questions:

Reasons and benefits for taking part in the FP funded projects, The role of the FP funded projects in innovation strategy, Characteristics of the projects undertaken within the framework programmes, Project level characteristics and their relation to innovation impact, Firm level characteristics and their relation to innovation impact, Industry and market characteristics and their relation to innovation impact, Effects of additionality.

The study has been carried out in the course of 20 months by an international consortium of European research teams under the guidance of a highly qualified High Level Advisory Group. The present report draws exclusively on the data collected in the case studies. Thus, although it is a stand-alone report, it should be considered as a complementary part of a much larger research effort involving econometrics and statistical analysis of quantitative data. The objectives of the case studies is to provide deeper explanations to the problematic under investigation, vivid illustrations from the reality of the RTD projects, and insights into cause-effect relations beyond what can be achieved from the quantitative analysis. The qualitative research followed well accepted approaches to designing and conducting case studies, and analysing and reporting on qualitative data. The authors of the report wish to strongly and collectively emphasize that the findings presented by no means can be taken as generalisable or representative beyond the single or small number of converging cases from which they were extracted. The correct way of reading results from case study research in general and taking impression of the findings is to approach them from the perspective "This fact, concept, opinion or interpretation is something that might characterise or occur in relation to an FP funded RTD project. Knowing that this might be the case, it can be useful to know and reflect upon in different instances and for different objectives and goals".

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Concerning the reasons and benefits, organizations take part in the EU FP funded projects for a number of different reasons, the most frequently invoked being funding, to explore emerging technologies and their link to competitiveness, building reputation, tap into networking opportunities, explore commercial opportunities and expand markets, and support long term R&D and reinforce R&D activity. The case study organizations evoked a number of reasons for their participation no interviewee pointed to a single dominating reason for participation. Moreover, although case organizations make rich references to organization (firm) level motivational factors, the influence on these factors of the choice of instrument and type of project is rarely mentioned. Organizations seldom seem to deviate from their own core objectives because of the differences between the instruments and project types. When a certain instrument and project type is mentioned, it appear to be an indirect effect of the funding opportunity they provide and how that particular opportunity is aligned to the research and business objective of the firm. It is also important to note that there seems to be a clear difference between the motivational side and the output side of the projects. While reference to the different motivational factors is abundant, the output side is by many referred to in very general terms such as "We were satisfied with the results of the project", without detailing the results against the initial objectives or going more deeply into the overall benefits from project participation. The importance of linking the analysis of the different objectives and achievements to the frame and perspective of the different organizational structures and the existence or absence of clear strategic goals can not be underestimated. In cases where we have found a failure to achieve any of the project goals as set out in the proposal the absence of clear strategic goals for EU FP participation is omnipresent. From the case analysis it also appears that innovation objectives seem to be most successfully achieved when the EU funded project is closely integrated with and linked to the overall management and R&D structure of the organization especailly this holds true for firms. Concerning the role of the FP funded projects in innovation strategy, four categories of participanst have been identified. The first category has a very clear and explicit strategy as regards these organization's involvment in EU funded projects. For many of them these projects play a key role. These participants, that could be referred to as "focused project exploiters" are in general quite satisfied with the projects, the partnerships, and the outptut and results they got from the projects. The second group are a bit more sceptic about the EU projects, for various reasons such as the administrative burden, the complexity of consortium management, the lack of fit between the project time horizon and the requirements and constraintes of markets, the risk of knowledge leakage, etc. In spite of these difficulties and uncertainty factors these organizations generally keep on participating, most of the time for networking reasons, to "know what happens in the business" and because it is an opportunity to conduct research a bit at the periphery of the core R&D activities. Generally speaking, those participants have a clear innovation strategy, but in which the FP project are only marginal. A third category is formed of very different companies with to some extent quite unusal profiles as compared to the average FP participants identified from the survey. They are also going in FP projects for very specific and highly contextual reasons. Finally, some companies have no clear strategy as regards FP projects, and their implication is merely a matter of opportunity. Quite often, these "ad-hoc project participants" have a less clear innovation strategy, being engaged more in development and exploitation activities of incremental nature.

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Concerning the characteristics of the projects undertaken within the framework programmes, the case studies confirm many of the results from the survey. When compared to the "average" R&D project undertaken by the participants, FP projects are undoubtedly more complex, more long term oriented and closer to the core of the participants' activities, and a bit more risky from a scientific and technological point of view; but they are more or less in the same range of cost and commercial risk. When compared to collaborative RD projects that are self-funded by participants (i.e., not publicly-funded), FP projects tend to show the same specificities except that they are farther from the core activities of the participants. Of course, there are always exceptions to these profiles, but they are not so many and seem to correspond only to specific situations. Hence, the case studies support the robustness of these results from the survey. Concerning project level characteristics and their relation to innovation impact, the analysis was conveniently conducted along the major phases trough which the projects unfold; planning and set up, implementation, and dissemination, evaluation and closure. In addition, transversal enabling and inhibiting factors were analysed. In the planning and set up phase the results elaborate further on how different reasons and the integration of the projects in the innovation strategy affect innovation impact. The role of the coordinator is identified as very important, both in terms of as a coordinator being able to shape the research agenda to a large extent and also being able to face and overcome different problems that occur during the project life. In the implementation phase, organizations put much emphasis on the difficulties of accumulated delays and an unclear agenda towards development that affect negatively the innovation impact. There is often a lot of pressure towards the end of projects, and this end project pressure jeopardizes exploitation activities of the outcomes. It might also take more time than expected to get a new project going, and towards the end there might also be a tendency of "project management fatigue" in terms of a lessened rigour in terms project activities towards the end. These phenomena increases the problems of pressure and unfocused exploitation efforts. This leads to the analysis of the dissemination, evaluation and closure phase, where case study interviewees expressed a range of quite varying opinions ranging from dissemination as a core activity to an insufficient and poorly organized effort for reaching markets. What could be retained in somewhat general terms is that the dissemination, evaluation and closure phase could be much better structured and organized for enhanced exploitation and innovation impact outcomes. Concerning firm level characteristics and their relation to innovation impact, the unit of analysis was the individual organizations studied and not the projects in which they had participated per se. The objective with this analysis was to identify and unpack what contextual factors in terms of organizational structure, strategies, and operational procedures act in favour or not for innovation impact from the FP funded projects. Also here the analysis conveniently unfolded along the project phases. In terms of planning and set up, factors related to mission, strategy, goals, age, size and resource base of the organizations were studied. It was clear that mission, strategy and goals play and important role for what comes out of the projects. As the latter provide quite wide degrees of freedom in terms of set up and focus, organizations with a mission to transform research results into commercial outputs, integrating the projects with their strategy and setting and following up on specific goals seem to be those reporting greatest satisfaction of the project outcomes. In terms of size of the organizations which also seemed to be quite lineary correlated to age and resource

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base, medium-sized firms seem to be those that can show most significant innovation impact from the projects. Large firms do rarely target commercialisation through the FP funded projects, they have dedicated R&D and NPD processes for this. SMEs on their side are often too focused on a core technology and too centred on research (compared to on development) in order to be able to sustain market driven development and commercialisation in their own right. Hence, if such firms partner up with research organizations (whose major goal is very rarely commercialisation), there is very little chance for the project to conduct to innovation with impact in the marketplace. With respect to resources, and rather organizational capabilities, some of the studied organizations showed interesting examples of how a well developed and cultivated innovation culture and social or relation capital can support the reaching of targeted outcomes. In the implementation phase, organizational and process factors play important roles. Organizational integration, and especially the extent to which other functions such as marketing, finance and production support or not the R&D activities, and facilitate or hamper the effective exploitation of R&D outcomes was emphasized in the cases. Generally speaking, it seems that integration is not a major problem in the projects, and that the existence of an explicit R&D / Innovation / NPD structure and model proved supportive for producing innovation results. In the dissemination, evaluation and closure phase, an important issue is how the organizations can protect the outcomes of the projects. Clearly the issue of protection mechanisms is size related. Bigger organizations are both better prepared and organized with respect to the explicit means of protection, and, due to their completeness, complexity and history of R&D activities, they can also more effectively rely on the implicit mechanisms. Moreover, in the capacity of their size effect, they are much stronger compared to smaller players if they decide to follow an offensive line of action with respect to right and protection issues, and much less vulnerable if they chose a defensive line of action. Moreover, and similarly to commercialisation, patenting requires specific capabilities, processes and routines that if non existent are difficult to build up, while if existent are activated for each project with the result of a serial effect of auto-reinforcement of the capability. Patenting is also an important issue for the research organizations, but it is not always that the EU funded FP projects are the best vehicles for patenting from their perspective. Rather, they sign closed bilateral contracts with industry partners when research findings are promising for wider commercialisation. The next area of analysis concerns the industry and market characteristics and their relation to innovation impact. Hence, the level of analysis takes here place at a level beyond control of the project or the organization, focusing on the environmental conditions and their impact on innovation. Four classes of organizations were identified among the case studies: Organizations operating in a monopolistic/oligopolistic market with high or low technology/innovation intensity, and organizations operating in a competitive market with high or low technology/innovation intensity. The first group is characterized by very high entry barriers and a low standardization of products and services. This environment seems favourable for achieving innovation and engaging in processes towards commercialisation, processes which are reinforced by the fact that most case organizations in this group are large-sized with well structured R&D models and strong strategic integration of the FP funded projects. As far as the organizations in monopolistic or oligopolistic markets with low technology intensity are concerned, the share the low standardization characteristic of the former group, but entry barriers are generally speaking lower and the

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"absorptive pull" for innovations from markets is by definition much lower. Innovation is also usually considered as incremental. Conversely, the markets are characterized by strong institutional and regulatory forces (many organizations in this group have mainly public customers), which slow down the processes of new technology adoption but simultaneously provide an advantage for those organizations that can surmount this entry barrier factor. In the group of organizations operating in competitive markets with high innovation intensity the case sample mainly consisted of SMEs. These companies are affected by the high turbulence in their markets when joining and implementing the FP funded projects. Consequently, they engage in projects that can reinforce their cutting edge niche technology and enable them to leverage commercial outcomes as rapidly as possible. The risk factor is to be exposed to larger companies that might be out for scanning off and absorbing their competencies. Companies in this group found the EU rules somewhat counterproductive to their needs of fast moving development. The final group, competitive markets with lower innovation intensity, is characterised by a relatively higher standardization of technology. Here many organizations engage in the FP funded projects in order to develop a differentiation capability from enhanced R&D. Concerning effects of additionality finally, these refer to effects that might leverage organizational resources, capabilities and performance well beyond what was strictly scoped and achieved from the participation in a particular project, the EU FP funded RTD projects have penetrated. Such effects were found and the explanatory processes behind them essentially boil down to the degree of fit between the organization's running R&D agenda and the participation in specific projects. The better the fit, the greater the practical need and the actual usefulness of project results and learning outcomes to other activities of the organization. To conclude, the case study analysis has provided quite rich and though-provoking insights and examples from inside the life of the FP funded FP projects. There is indeed a very rich and diverse panoply of reasons, modes of integrating, processes of executing and strategies of exploiting the outcomes of the projects. Overall, it seems beyond doubt that the EU funded FP projects have had and continue to have a major impact on a large part of the population of European firms and organizations that are engaged, in one way or another, in R&D activities. The projects have penetrated all concerned regions and countries, small and large firms, become an indispensable means for research funding in Research Organizations and Universities, and have reinforced and even triggered research in a number of promising fields of science and technology development. As such, the possibly most positive input that we have sensed from the several hundred of interview man-hours is maybe the one expressed by an R&D Director in a large-sized highly R&D intensive firm, namely that "The EU FP funded RTD projects provide the infrastructure for bringing together all the players in specific technology fields and thus, potentially, have a very positive leverage effect a kind of ticking innovation bomb that hopefully will enable Europe to reach its ambitions innovation goals". Conversely, our study does not hide many difficulties and doubts concerning the efficiency and relevance of project participation. Some organizations are sceptical concerning further engagement in thus type of projects. The possibly most negative input from our case studies concerns the perception of some firms and organizations that the intentions and objectives of the EU in terms of

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R&D output and innovation impact remains very diffuse and that the institutional context is more focused on control and procedural issues.

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For the research team carrying out the Innovation Impact project, and focusing on the qualitative analysis based on the case studies, it has indeed been rich learning experience. Our hope is that the readers of this report, and in particular the European Commission Directorate-General for Enterprise and Industry, will find the examples, stories, analyses and conceptualisations interesting, informative and useful for further improving and developing the RTD initiatives and instruments under the Framework Programs. Last but not least, the research team also wishes to thank all the interviewees in the case study organizations for having agreed to share their insights and experiences with us. Their contribution to advancing the knowledge about the issues under investigation cannot be overestimated.