Competencies in Production and Research

Local demand opportunities and competitive pressures will not result in innovation unless firms have the competencies that enable them to respond Corporate and national competencies in production and in research are essential.

There are significant differences amongst apparently similar European countries in the level of production competencies. In the 1980s and 1990s Professor Prais and his colleagues made detailed comparisons of the level of education of the workforce in five European countries (France, the federal Republic of Germany, the Netherlands, Switzerland and the UK) Although similar at the top of the educational pyramid, the differences amongst countries in the proportion without any qualifications were particularly striking varying from less than about a quarter in Germany and Switzerland to nearly two thirds in Britain. More detailed case studies comparing British and German firms show that these differences in kills make an important competitive difference with productivity in the German firms being as much as twice as high, with equal or superior product quality, because German workers are more skilled in repairs in learning new techniques more quickly.

Behind the differences in vocational skills are important international differences in basic education, which will become critical with the growth of the knowledge economy. These have recently been revealed in an OECD survey, some of the results of which are summarized. The first three columns compare three major dimensions of literacy and the fourth gives the share of the population with only rudimentary levels of skills, judged inadequate for coping in modern society. A number of conclusions emerge from these able and related sources.

The survey confirms the higher level of skills in Germany than in the UK but not to such a striking extent, probably because the survey includes inhabitants of the old German Democratic Republic, who are not as well educated as their West German counterparts who were the subject of the earlier studies by Prais.

In spite of a well developed system of higher education the US ranking is not the highest in part because if are relatively large share of the population with Level 1 (i.e. lowest level) skills. The same is true of the UK.

The Czech Republic and (to a lesser degree) Hungary have skills comparable to those in western European countries which combined with their currently low salary levels, may help explain their attractiveness to international investors.

The Scandinavian countries have the highest levels of skills and the smallest proportions of the population with lowest level skills which may partly explain their relatively high levels of adoption of Internet related technologies.

National competencies in research are also an important input into firms technological capabilities. Especially in large firms, R&D laboratories actively seek support knowledge and skills from National basic research activities, especially in universities. The knowledge they seek is mainly tacit and person embodied which explains why language and distance are real barriers to co-operation and why the firms generally prefer to deal with domestic universities. It also explains why the differing national levels of production of basic research, measured in table as the number of papers per head of population, are similar to the national levels of investment in technology measured in Table. This is because technology in dynamic business firms demands high quality investment in national basic research. The apparent exception in Japan, but this simply reflects the lag in the basic research system which is now expanding rapidly – in quantity and quality – in response to the world frontier technological investments by business firms.

Comparative performance of national systems of basic research

Country Paper per 1000 population in 1993

Switzerland 1.471
Sweden 1.297
Denmark 1.074
India 0,016
UK 0.912
USA 0.886
Source: Managing Innovation