Notes from the Field

This paper on the Industrial Technology Research Institute (ITRI) of Taiwan provides a very interesting case description of this well-known and successful institute supporting new business formation in the high-tech area, especially through "spin-off" firms that rely largely on staff and know-how from the institute. It describes the mutual benefits from ongoing, synergistic relations between ITRI and the new firms. The authors provide details on four successful cases covering three micro-electronic firms and one biotechnology firm out of the 30 spin-offs that have been promoted by ITRI. The description of the success of ITRI in promoting innovations raises at least three issues of general importance that I will comment on.

The issues of technology transfer and innovation promotion by government-supported institutions and research programs are of perennial interest. This is because the use of public expenditures always raises the question of value for money spent, possible alternate uses of public funds, and the inherent gap between the drivers and motivations of public institutions and private firms—most often the primary users of the technologies generated. Not surprisingly, the effectiveness of public-supported research and institutions remains an enduring area of research and practical interest. A major justification for public funds for research institutions lies in their potential for promoting economic growth through the promotion of innovations. Yet innovations are increasingly seen as a systemic output resulting from an innovation system that incorporates key subsystems—the "suppliers" of new codified and tacit knowledge (such as ITRI in this case) being only one of them, with the "users" of knowledge, such as firms, and a wider set of framework institutions and conditions, forming the larger system.

A variety of mechanisms exist to link the public research institutes to users, often described as the technology transfer process. Research centers transfer knowledge via a variety of channels including research publications, conferences, research contracts, consultancy, training, the movement of people from the institution, the licensing of intellectual property, and the establishment of spin-off companies. The four cases here describe well the fact that successful innovations require constant interactions between several subsystems, of which the research institution is only one. The description highlights the importance of networks and partnerships across organizations that provide for effective communications linking them. Such networks have both formal and informal dimensions, and both are important. Informal links are particularly important because they help to foster trust and lower transaction costs. The intimate knowledge of the individuals who bridge ITRI and the firm—a step that requires nurturing relationships through training, workshops, and joint appointments—allows both parties to know each other's needs and capabilities and the nature and quality of the knowledge and services offered. The resulting level of trust reduces risks and the need for formal and legal contracts. Importantly, such networks lead to the "clustering" of actors in the same location for many innovations, as mentioned here, in both Silicon Valley and in Hsinchu (and several other locations). ITRI, as mentioned here, is able to network with two major universities, NCTU and NTHU, and with several hundred high technology firms at the Hsinchu Industrial Park (HSIP). Although communications and extension remain important in linking research to users, the role of people is often underemphasized in policy. The paper points to the importance of the movement of trained people: 15,000 employees from ITRI overall and 5,000 to the high-technology firms in HSIP.

The innovation systems perspective also alerts us to the importance of "framework conditions" and system infrastructure as crucial elements. The wider system framework refers to ways of working, aspects of culture, the social value placed on innovation and entrepreneurship, the financial systems, and larger economic forces. These factors often explain the critical difference between public institutions in different environments, between those that have been more successful at innovation promotions and those that have been less so. The paper discusses technology licensing and payments for the intellectual property rights transferred through fees and equity ownership, but the value of these payments to ITRI is not dealt with explicitly in the paper, and appears to...