Global innovation networks drive wealth and progress

[Rome, Italy, 7 November, 2018] A new study presented today reveals the close relationship between globalised innovation chains and long-term benefits such as productivity gains and economic progress. The research, carried out by the Economist Intelligence Unit on behalf of Huawei, looks at the factors driving development, including increased R&D spending, openness and a multilateral approach.

The study, which was presented at the Huawei European Innovation Day in Rome, analyses the development and benefits of global innovation networks (GINs), as well as the recent challenges facing them. It identifies a number of trends and drivers behind the development of such networks, while also highlighting bottlenecks and stumbling blocks.
These are some of the key findings:

• Global R&D spending is on the rise, with activities increasingly crossing borders.
• Current protectionist sentiment might cause a slowdown in internationalisation and R&D outputs.
• Global innovation networks have flourished partly thanks to the move towards a model of open innovation.
• The system tends to be self-organised, evolving organically with no top-down structure, and involving firms of various sizes contributing to innovation.
• Emerging economies use GINs to leapfrog and speed up their development towards the technological frontier.
• GINs involve higher collective productivity among participants; this is an aspect easily overlooked by short-term statistical measures.

“We warmly welcome this new piece of research, as it highlights some of the key aspects to consider in order to continue achieving breakthroughs and productivity gains. Huawei is firmly committed to collaborating across the global value chain in an environment of open competition.”
Quote from John Ferguson, Director of Global Forecasting and Country Analysis of EIU.

Background
Global innovation networks are defined broadly as “a globally organised web of collaborative interactions between different organisations engaged in knowledge production that is related to and resulting in innovation.”

GINs have emerged across a range of industries, thanks to the rapidly declining cost of moving information. Ideas that just three decades ago might have been prohibitively expensive to obtain—think of a $5 per-minute international call, or a day's work at the library—are today just a few clicks away.

With relentless ICT hardware and software advancements, as well as decreasing connectivity costs, global conversations and information flows have improved dramatically. Researchers and scientists at opposite ends of the world are every day finding it easier to innovate collaboratively, and in increasingly sophisticated ways.

Global Innovation Networks White Paper will be available for download on EIU’s website soon.

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Global Innovation Networks White Paper: key findings

• The world is spending more and more on research and development (R&D) activities, and they are increasingly of a cross-border nature. Global R&D intensity (spending as a proportion of GDP) has risen in every region of the world over the past two decades, led by East Asia. And an increasing share of this work involves cross-border collaborations. For instance, from 1990 to 2015, the share of scientific papers by co-authors from different countries grew from 10% to 25%. Additionally, today some 94% of the world’s largest firms (by R&D expenditure) conduct R&D work overseas.
• Current protectionist sentiments might cause the internationalisation and outputs of R&D to slow. Today, there is a growing fear that, just as better connectivity is enabling GINs to flourish in numerous industries, a wave of protectionism and nativism threatens to undermine them. The 2017 Global Innovation 1000 survey by PWC found, for example, that one-quarter of firms have already experienced pressure to change where and how they conduct innovation work.
• Global innovation networks have flourished partly because of an important philosophical shift at the firm level: from a model of closed to open innovation. Closed innovation refers to the prevailing method for most of corporate history, one where a firm guarded its internal knowledge and intellectual property in order to prevent external diffusion. Over the past few decades, however, a number of factors have together fomented a gradual then accelerating openness. These include the growth in the supply of knowledge workers and their increased mobility, as well as the increased availability of private venture capital, which has enabled innovative ideas to be commercialised outside the traditional boundaries of corporate R&D.
• In a typical global innovation network, there is a dispersion of innovation between different-sized firms; the system tends to be self-organised, evolving organically, with no global controller or top-down direction. While multinational corporations (MNCs) control some innovation phases, developed country small and medium-sized enterprises (SMEs) control others, while emerging-market SMEs control still other spaces. This exhibits a fluidity meaning that not only individual firms, but entire innovation regions, can be swapped in and out depending on relative competitiveness. The benefits of GINs to MNCs include access to world-class talent at universities, and the ability to explore leading-edge technology before it enters the mainstream. One central challenge is the ability for different actors to identify a central theme of shared interest.
• Global innovation networks and emerging economies appear to have a symbiotic relationship. Innovations that arise to deal with constraints in emerging economies, such as the mobile commerce services pioneered by Kenya's M-Pesa, are being replicated and forcing process rethinks across the world, with a velocity only made possible through modern GINs. At the same time, GINs are arguably of greater importance to emerging economies than developed ones, potentially because emerging economies are looking to use technologies to leapfrog and accelerate their development towards the technological frontier.
• Even if GINs are characterised by a higher collective productivity among participants—a core belief of GIN advocates—it is not something that will easily or necessarily be demonstrated by current, short-term statistical measures. Overall productivity growth has been sluggish in the developed world over the past decade, which runs counter to the popular belief that the smartphone and other technologies have greatly enhanced workplace productivity. A techno-optimist explanation is that current measures are failing to capture the huge gains actually occurring. A techno-pessimist one is that modern, “General Purpose Technologies” like artificial intelligence (AI) are actually not as significant as earlier ones like steam and electricity.

Case study: The information and communications technologies (ICT) GIN
The ICT GIN has been largely responsible for the rapid evolution of the smartphone. Over the last two decades, the technology has shifted from early models made by Canada’s Blackberry, Japan’s NTT DoCoMo and Finland’s Nokia to modern versions by California’s Apple, South Korea’s Samsung and China’s Huawei.
In the process, countries as diverse as India (e.g. back-end design and testing work), Israel (e.g. security software) and the United Kingdom (e.g. energy-efficient ARM processors) have plugged into the ICT GIN.
There are numerous other actors, from government agencies to early-adopter consumers, who have played some important roles in this innovation cycle.

About Huawei
Huawei is a leading global provider of information and communications technology (ICT) infrastructure and smart devices. With integrated solutions across four key domains – telecom networks, IT, smart devices, and cloud services – we are committed to bringing digital to every person, home and organization for a fully connected, intelligent world.
Huawei's end-to-end portfolio of products, solutions and services are both competitive and secure. Through open collaboration with ecosystem partners, we create lasting value for our customers, working to empower people, enrich home life, and inspire innovation in organizations of all shapes and sizes.
At Huawei, innovation focuses on customer needs. We invest heavily in basic research, concentrating on technological breakthroughs that drive the world forward. We have more than 180,000 employees, and we operate in more than 170 countries and regions. Founded in 1987, Huawei is a private company fully owned by its employees.
 

About The Economist Intelligence Unit
The Economist Intelligence Unit (EIU) is the research and analysis division of The Economist Group, the sister company to The Economist newspaper. Created in 1946, we have over 70 years' experience in helping businesses, financial firms and governments to understand how the world is changing and how that creates opportunities to be seized and risks to be managed. A British company, we are intensely global. We service clients across the world from our 24 offices, our staff speak over 25 languages and we embrace foreign cultures with a passion.

For more information, please contact
 Andrew Williamson
Vice President of the President’s Office, Public Affairs and Communications Department, Huawei Technologies
E-mail: andrew.edward.williamson@huawei.com

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