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Variation In National Innovation Policy and

Performance - Ireland and Taiwan.

Student: Robert Cook

Advisor: Dr Grace Lin

June 2007

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Variation In National Innovation Policy and Performance

- Ireland and Taiwan

Student: Robert Cook Advisor: Dr Grace Lin

A Thesis

Submitted to the Institute of Management of Technology College of Management

National Chiao Tung University in partial Fulfillment of the Requirements

for the Degree of Master

of

Business Administration

June 2007

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- Ireland and Taiwan

Student: Robert Cook Advisor: Dr Grace Lin Institute of Management of Technology

National Chiao Tung University

Abstract

Keywords: Innovation Policy, Innovation Performance, Ireland, Taiwan

The thesis seeks to compare innovation performance and policy in two countries that have had rapid economic growth in similar areas of their economies; Ireland and Taiwan. The literature review examines the nature of technological innovation, the role of innovation in economic growth, the NIS approach , innovation performance and policy.

The discussion of context and economic development history of the countries shows different patterns. Ireland has had a history of failed government economic initiatives. The recent prosperity has mainly come from investment in various forms of infrastructure, structural reforms and low taxation; which has been used to attract FDI. Taiwan has a history of government controlled gradual industrial development with a focus on manufacturing. Unlike Ireland where outside MNC’s dominate industry Taiwan contains a large number of small companies and a few large indigenous companies.

Comparison of innovation policy shows that the Taiwanese government using a more active top down approach, making use of substantial levels of government research funding and resources to develop target industries. In contrast to this is the bottom up approach of the Irish government that focuses on innovation environment and level firm R&D.

The innovation performance of the countries is compared using a multi-factor model, key indicator being the ratio of US patents. The results show strong long term innovation performance for Taiwan and relatively weak performance by Ireland. Other factors indicate Taiwan has a stronger innovation capacity than Ireland particularly regarding R&D. Also included in the analysis are economic growth, industry growth and other contributions to economic growth. Which show that Ireland has exceedingly high levels of FDI inflow accounting for its recent economic growth.

Differences in policy and performance are then analyzed. Findings show that geographical location and the recent increase in globalization played a major role in the differences. This is particularly true in relation to the role of FDI in Irish prosperity, which contrasts with the innovation based economic growth of Taiwan. The bottom up environment emphasis shown in Irish innovation policies and the top down interventionist policies of Taiwan, are shown to be based on historic growth and government development orientation as a result of these growth patterns. Strong Taiwanese innovations performance maybe due to the high priority of the innovation system, along with policies of research funding and targeting by the government. The weak levels of innovation in Ireland can be linked to the unsuitability of bottom up policies, weak university system and lack of a clear innovation focus.

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Acknowledgements 

I would like to thank a number of people without which this thesis would not have been possible: My advisor Professor Grace Lin for her constructive criticism, patience and helpful advice. Professor Joseph Shyu for his time, input and comprehensive lecture materials on innovation. Professor Yiming Li for his invaluable help with revision. And Professor Hsiao-Cheng Yu for his support throughout my time at Chiao Tung.

My deep gratitude goes to the Government of the Republic of China and National Chiao Tung University for providing me with the scholarship and opportunity which has enabled me to study an MBA in Management of Technology.

Last but certainly not least I wish to thank my dear wife Shu-Chin for her unwavering love and support.

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Important Note 

Throughout this thesis Taiwan refers to the island officially called the Republic of China by its government. The use of the word Taiwan is purely for academic and practical reasons, it does not imply that the author supports any particular political standpoint.

Within the following text the word Ireland refers to the country the Republic of Ireland not the geographical island of Ireland and thus does not include Northern Island.

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Contents 

1. Introduction ... 13

1.1 Motivation and Objectives ... 13

1.2 What is Innovation?... 15

1.3 National Innovation ... 17

1.3.1 National Innovation Systems...18

1.3.2 Measurement of National Innovation ...27

1.3.3 National Innovation Capacity... 31

2. National Context and Background - Ireland and Taiwan ... 36

2.1 Ireland... 36 2.1.1 History ... 36 2.1.2 Economic Development ...36 2.1.3 Economic Summery ... 37 2.1.4. Economic Issues ... 38 2.1.5 Regional environment ... 40 2.1.6 Geography ... 40 2.1.7 Political Environment ... 41 2.1.8 National Resources ... 42 2.1.9 Culture ... 42 2.2 Taiwan ... 44 2.2.1 History ... 44 2.2.2 Economic Development ...45 2.2.3 Economic Summery ... 46

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2.2.4 Economic Problems... 47 2.2.5 Regional Environment... 48 2.2.6 Geography ... 49 2.2.7 Political Environment ... 49 2.2.8 National Resources ... 51 2.2.9 Culture ... 51

3. Innovation Policy Comparison: Ireland and Taiwan... 53

3.1 Introduction to Policy Comparison ... 53

3.2 Government Structures of Innovation Policy ... 58

3.2.1 The Irish Policy Creation and Implementation Structure... 58

3.2.2 Key Government Organizations in the Irish Innovation Policy Network ... 58

3.2.3 Current Stated Objectives for Irish Innovation Policy ... 59

3.2.4 The Taiwanese Policy Creation and Implementation Structure ... 61

3.2.5 Key Government Organizations in the Taiwanese Innovation Policy Network ... 62

3.2.6 Current Stated Objectives for the Taiwanese Innovation Policy... 63

3.3 Supply Side Policies ... 65

3.3.1 Ireland Supply Side Policies... 65

3.3.2 Taiwan Supply Side Policies ... 66

3.3.3 Supply Side Policies Comparison ... 67

3.4 Environmental Side Policies... 71

3.4.1 Ireland Environmental Side Policies ... 71

3.4.2 Taiwan Environmental Side Policies...72

3.4.3 Comparison Environmental Side Policies ... 74

3.4 Demand Side Policies... 77

3.4.1 Ireland Demand Side Policies... 77

3.4.2 Taiwan Demand Side Policies... 77

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3.5 Main Policy Differences... 79

3.5.1 Targeted VS General ... 79

3.5.2 Top down VS Bottom Up Approach ... 79

3.5.3 Criticisms... 80

4. Innovation Performance Comparison: Ireland and Taiwan... 81

4.1 Introduction to Performance Comparison ... 81

4.2 Patenting ... 87

4.2.1 USPTO Performance ... 87

4.2.2 Long Term Patenting Trends... 91

4.2.3 Investigating These Results ... 93

4.3 Cluster Formation ... 96

4.3.1 Clusters in Taiwan ... 96

4.3.2 Clusters in Ireland... 99

4.4 R&D Expenditure and Employment ... 100

4.4.1 R&D Expenditure ... 100

4.4.2 R&D Employment... 101

4.5 Industrial and Economic Performance ... 104

4.5.1 Whole Economy Performance... 104

4.5.2 Industry Performance ... 108

4.6 Other factors Contributing to Growth ... 113

4.6.1 FDI... 113

4.6.2 EU Funding ... 115

5. Findings and Conclusions... 117

5.1 Findings on Innovation Policies ... 119

5.2 Findings on Innovation Performance ... 120

5.4 Interaction Between Policy and Performance ... 121

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5.4.2 The Effect of Innovation Policy on Performance... 124

5.5 Effect of Context on Policy and Performance ... 126

5.6 Suggestions... 127

5.6.1 Suggestions Regarding Taiwan ... 127

5.6.2 Suggestions Regarding Ireland... 127

5.6.3 Suggestions For Both Countries ... 128

6. Areas for Further Research... 129

6.1 Demand Based Innovation Policies... 129

6.2 FDI and Innovation Policy Relationships... 129

6.3 Industry Growth Analysis... 129

Bibliography ... 130

Appendix 1 - Ireland and Taiwan Long Term Economic performance ... 141

Appendix 2 – USPTO Patents per Million ... 143

Appendix 3 - Innovation Indicators and Performance... 145

Appendix 4 - Industry Performance Ireland ... 149

Appendix 5 - Industry Performance Taiwan ... 152

Appendix 6 - FDI Inflows and Outflows as a relationship to GDP... 155

Appendix 7 – Summary Data Taiwan and Ireland ... 156

Appendix 8 – FDI Patent Correlation... 158

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Tables 

Table 1 Linear Innovation Process ... 19

Table 2 Elements That Determine National Innovation Performance Tabulized version of Page 233 to 234 Innovation Policy and Performance: a Cross-Country Comparison (Organization for Economic Co-operation and Development, 2005) ... 26

Table 3 Explanation of GDP &GNP ... 1

Table 4 Problems With Patents as an Innovation Indicator... 30

Table 5 Foundation theories of NIC ... 31

Table 6 National Innovation Capacity Sub indexes (Furman, Porter, & Stern, 2002)... 32

Table 7 Classification of Government Innovation Policy Tools. ... 55

Table 81 Cluster Innovation Performance (Furman et al)... 96

Table 9 Key Taiwan Clusters (OECD, 2004.)... 97

Table 10 Comparison of International R&D Levels ... 100

Table 11 Comparison of Researchers Levels ... 101

Table 12 Summary - Findings on Innovation Policies ... 119

Table 13Summary- Findings on Innovation Performance ... 120

Table 14 Summary - Findings on Policy Effect on Performance... 122

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Figures 

Figure 1 GDP comparison ... 13

Figure 2 Actors and Linkages in the National Innovation System... 21

Figure 4 Concept of the NIC framework... 33

Figure 3 National Innovation Capacity Framework Furman et al 2002... 1

Figure 5 The Innovation Orientation of National Industry Clusters Fulman et al 2002 ... 1

Figure 6 Ireland GDP Growth ... 1

Figure 7 Eurozone Map ... 1

Figure 8 Ireland Perception of Corruption ... 41

Figure 9 Taiwan Topography ... 1

Figure 10 Taiwan Perception of Corruption... 50

Figure 11 Institutional Framework of the Ireland Innovation System ... 1

Figure 12 Institutional Framework of the Taiwan Innovation System... 1

Figure 13 Funding in Irish Universities -OECD ... 69

Figure 14 International Patenting Performance... 90

Figure 15 Taiwan & Ireland Historic Performance USPTO Patents Granted Per Pop Million ... 94

Figure 16 R&D Funding Source... 102

Figure 17 Expenditure on R&D... 103

Figure 18 Comparison GDP Per Capita ... 106

Figure 19 Productivity Comparison ... 107

Figure 20 Value Added to Industries (Scaled) ... 112

Figure 21 FDI Comparison... 115

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1. Introduction

1.1 Motivation and Objectives

Both Taiwan and Ireland have been regard as locations that have performed economic miracles; one Taiwan was part of high growth “Asian Tiger” economies that included Hong-Kong, Singapore, Taiwan and Korea. The other gained the nickname the “Celtic Tiger” as its sudden economic rise during the 1990’s mirrored the growth of the Asian Tigers during the 1980’s. Growing from agricultural economies to major regional players, both have been studied as examples of national development and innovation. However GDP growth patterns have been markedly different see figure 1. In 1986 the Irish GDP per capita stood at 9265 US dollars and Taiwanese GDP per capita was a close 9088 USD. A decade later and strong growth in both countries had produced figures of 15481 and 14092, for Ireland and Taiwan respectively. By 2004 average annual working hours per employee in Ireland had dropped to almost 75% percent of their Taiwanese counterpart, the GDP gap had risen to nearly seven thousand dollars, and Taiwan had experienced a period very slow growth.

Figure 1 GDP comparison

In order to examine the reasons for this difference we must look at the factors that drive the competitiveness of the respective national economies. The Global Competitiveness Report places Ireland in the category of innovation-driven economies and Taiwan in the process of transitioning to one. For such innovation-driven economies it says “Innovation is the only self sustaining driver of growth and thus the main source of competitive advantage”(World

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Economic Forum, 2006). Empirical research has supported this idea of innovation as the key to national growth in advanced nations, in one study it was found that in the United States over fifty percent of economic growth can be attributed to various forms of innovation ( Milberge E / IBM Corporation, 2004). Statistical comparisons between countries of economic performance indicators show that the intensity of national innovative activity is correlated with higher rates of standards of living and productivity growth(Furman, Porter, & Stern, 2002).

The innovation as a driver of growth theory is derived from the economic theory of creative destruction put forward by Joseph Schumpeter, this states that in a capitalist society long term economic growth is generated by the creation of the new and the displacement of the old. As nations achieve higher levels of GDP per person the main source of this change become innovation.

Michael Porter describes changes in advanced countries thus “The challenges of a decade ago, were to restructure, lower costs and raise quality. Today, continued operational improvement is a given… (in advanced countries) advantage must come from the ability to create and then commercialize new products and processes, shifting the technological frontier as fast as their rivals can catch up”(Porter & Stern, National Innovative Capacity, 2001).

Thus in order to compare growth in Taiwan and Ireland we will look at their national innovation policies and performance.

This thesis will compare innovation policy and performance and investigate the possible reasons for differences. The research will examine applicability of the following thesis statement:

“Comparison of Taiwan and Ireland innovation policy and performance will show significant differences between the two. Furthermore these differences can be mainly explained by the following factors; geographical location, external funding and globalization trends.”

This thesis undertakes the following steps:

• Summarizes the national environment and situation • Analyzes and compares national innovation policies • Analyzes and compares national innovation performance

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It’s hoped the differences and similarities observed will contribute to the understanding of why small countries implement different policies while attempting to stimulate the same forms of innovation and why similar policies have different effects in different locations.

 

1.2 What is Innovation?

In order to examine the role of innovation in policy-making we must first examine how innovation can be defined. Number of different definitions exist for innovation dependent on the historical context, educational background and the field of study of the author.

The influential economist Schumpeter described successful innovation as “ a task Sui generis1” a task not of intellect but of will(Khalil, 2000). Khalil describes innovation thus:

Innovation involves the creation of a product, service, or process that is new to an organization. It is the introduction into the marketplace, either by utilization or by commercialization, of a new product, service or process. Within this definition it should be noted that innovation encompasses both physical innovation (product or process) and non tactile innovation (service).

Another definition is given by Betz who describes technical innovation in the following way(Betz, 2003):

Technical innovation is both the invention of a new technology and its introduction into the marketplace as a new high-tech product, process or service.

Like Khalil this definition views innovation as essentially a two stage process, comprising the development or discovery of a new method, product etc and the conversion of that into a commercial item. Betz calls these stages invention and innovation, and describes invention as, the creation of a functional way to do something, an idea for a new product.

From the above definition we can understand that in order to examine the effectiveness of innovation policy and performance we must examine both stages. That is the invention of new products, processes and services through government research, firm level research and university research and the commercialization of such research into products. It should be clearly understood that the invention of new techniques does not automatically result in new products(Organization for Economic Co-operation and Development, 1997).

Newer definitions of innovation have attempted to include both service and industrial innovation such as Milsbergs ( Milberge E / IBM Corporation, 2004):

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Innovation is a process by which value is created for customers through public and private organizations that transform new knowledge and technologies into profitable products and services for national and global markets

The current challenge in innovation theory and measurement in to understand innovation in the service sector. The study of innovation has typically focused on the manufacturing sector as this has historically been seen at the key driver of economic growth. This has resulted in many of the concepts of innovation being focused on the creation of physical products. In recent years the service sector has grow throughout the world and now accounts for the majority share of GDP by sector in almost all first world countries. For example in the United States the 2006 GDP composition by sector was Agriculture: 0.9%, Industry: 20.4% and Services: 78.6% (Central Intelligence Agency, 2006). This transitions creates a challenge for innovation theory, and systems that has yet to be met(Organization for Economic Co-operation and Development, 2005). What makes this change more difficult analyze is that service sector innovation is more commonly organizational rather than technical and is inherently more difficult to define ( Milberge E / IBM Corporation, 2004).

The shift towards the service sector also presents a challenge for innovation policy and NIS development in many nations.

Since service innovation theory remains in its infancy, and this report makes use of academically reviewed theories is acknowledged that service innovation may be underrepresented in both results and analysis

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1.3 National Innovation

Innovation is the process by which value is created for customers to the public and private organizations that transformed new knowledge and technologies into profit on products and services for national and global markets. A high rate of innovation, in turn contributes to more intellectual capital, marketing creation, economic growth, job creation, wealth and a higher standard of living.

Innovation will in the future become even more vital with global industrialization and the reduction of barriers between economies. The development of large countries such as India and China, mean that national economies, national and local firms will come under pressure from low labor cost countries which are starting to adopt existing technology and business methods. Thus, failure to innovate within a country can only result in economic hardship as the national competitive advantage is eroded. In addition, the expansion of organizations such WTO, and the European union, mean that national economies and firms face increased competition from advanced nations. The reduction in isolationism, protectionism and subsidies mean that local companies will be forced to compete with multinational companies with only limited government support. The OECD says “ the development and exploitation of the novel products, processes, services and distant, and the constant upgrading of those which a country already possesses, is the only way which OECD countries can maintain and increase their relative high levels of economic and social well-being”(Organization for Economic Co-operation and Development, 2005).

In order to understand the relationship between growth and innovation we must examine how innovation affects nations and the industries operating within them. Successful national innovation creates new products and services, these innovative items create wealth for the firms that generated them, produce new markets and often result to make profits overseas. Inversely low levels of national innovation result in uncompetitive firms, market stagnation (as markets and technologies reach maturity) and increase the relative strength of overseas firms. Empirical examples show that this is not a modern phenomenon but that similar patterns repeated throughout history for both nations and industries. One past example can be found in the history of the Republic of Venice which was one of the riches countries in Europe until innovation in shipbuilding during the 17th century made the Venetian ships outdated and reduced the nations trading importance. A more recent example of a similar

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pattern occurring at industry level is the decline in American auto industry that took place during the 1960’s. This was a period when American auto industry innovation had become stagnated and rapid innovation was taking place in the Japanese manufacturing sector (Ziemke & McCollum, 1987). During this period Japanese companies were developing fabrication techniques the resulted in lower cost and more reliable cars. When Japanese companies began to import such cars into the United States local manufactures very rapidly lost market share resulting in an industry crises.

1.3.1 National Innovation Systems

In the historic context, innovation was viewed very much at the linear process, during the initial attempts at stimulating innovation within economies, it was thought that research and development spending would directly result in increased national innovation.

After the second world war the commonly used model of innovation was linear development, innovation was seen as a number of stages in a sequential process which flowed logically in one direction (see Table 1 Linear Innovation Process). This approach tended to isolate the act of innovation from the social mechanisms that underlie the generation of innovation and the production of new products (Abrunhosa, 2003). In addition it de-emphasizes the role of institutions in the process, it places weight on the process not on the factors that contribute to the process. The linear concept also contributes to the view that innovation is push-pull process resulting in models that use technology-push or demand-pull as the keys to innovation generation.

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Stage Measures

Basic Research University R&D funding, Number of research personnel

Applied Research Corporate R&D funding, Number of Invention National patents

Commercialization New products, US patents (for overseas companies)

Diffusion Adoption and licensing of technology Table 1 Linear Innovation Process

The linear view of innovation continued to dominate innovation research for a long period One of these was the influential economists of the of the 1930s and 1940s period Joseph Schumpeter noted economic theory of creative destruction which was placed technological innovation and development at the very heart of economic development. Although innovation was at the heart of capitalism he believed that capitalism often failed to generate innovation particularly in small companies which tended to copy rather than develop (Teitelman, 1994). The concept that capitalistic societies are not necessarily efficient and innovation generation and adoption meant that a more holistic approach was needed to understand the various aspects that contributed to innovation. One of the catalysts for the rethinking of innovation was the economic downturns in the United States and Europe during the 1970s and early 80s, innovation had been seen as the driver for economic growth and these societies continued to be innovative (when measured by conventional innovation measures such as patenting), the continuation of innovation failed to be matched by economic growth has predicted by previous theories. Out of this rethinking came a new view of innovation a view were innovation was described by the flow of information and nature of linkages; the national system of innovation.

The concept of a system of innovation was introduced by Lundvall in 1985. This theory was then expanded by Freeman in 1987, and it was he who coined the term national innovation system. He described the National innovation system as “ the network of institutions in

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public and private sectors whose activities and interactions initiate, import, modified and diffuse new technologies.” (Freeman 1987 cited in(Organization for Economic Co-operation and Development, 1997)). Lundvall defined national innovation system as a ” the elements and relationships which interact in production, diffusion and use of new, and economically useful, knowledge… and are either located within all rooted inside the borders of a nation state”(Lundvall 1992 cited in(Organization for Economic Co-operation and Development, 1997). However both these pioneers suggest that similar concepts were discussed in Europe during the 19th century.

Modern innovation theory (particularly National Information Systems theory) emphasizes the importance of linkages and interaction between the people, system and organizations involved in technology development in translating the inputs to outputs (Organization for Economic Co-operation and Development, 1997). The various institutions and organizations within the national innovation system are described as actors and innovation is that the flow of the relationship between the actors and their production, distribution and application of knowledge. National innovation performance is dependent on and can be examined by understanding how the actors relate to one another within the concept of the National innovation system. This concept is visualized in Figure 2 Actors and Linkages in the National Innovation System

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Figure 2 Actors and Linkages in the National Innovation System

Source OECD cited in (Feinson, National Innovation Systems Overview and Country Cases, 2003)

In order to better understand the linkages between actors the OECD grouped them into the following categories:

• Governments (local, regional, national and international) that play the key role in setting broad policy directions;

• Bridging institutions, such as research councils and research associations, which act as intermediaries between governments and the performers of research;

• Private enterprises and the research institutes they finance;

• Universities and related institutions that provide key knowledge and skills;

• Other public and private organizations that play a role in the national innovation system (public laboratories, technology transfer organizations, joint research institutes, patent offices, training organizations and so on).

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The concept of the National Innovation System has become ubiquitous in both the context of international organizations dealing with innovation development (OECD, European Commission etc) and within government development organizations. Lundvall speculated that this way of viewing innovation became popular because “mainstream macroeconomic theory and policy have failed to deliver and understanding and control of the factors behind international competitiveness and economic development” Lundvall cited in (Feinson, National Innovation Systems Overview and Country Cases, 2003).

The OECD suggest the factors that have recently further increased the importance of this approach in technology field. These are: (Organization for Economic Co-operation and Development, 2005)

1. The recognition of the economic importance of knowledge. 2. The increasing use of system approaches

3. The growing number of institutions involved in knowledge generation

Although there are a number of academic and governmental perspectives on the determinants of innovation performance from a NIS perspective the OECD suggests that it can be assumed to include the key elements or drivers shown in - Table 2 Elements That Determine National Innovation Performance Tabulized version of Page 233 to 234 Innovation Policy and Performance: a Cross-Country Comparison (Organization for Economic Co-operation and Development, 2005)

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Relevance to the model Element OECD exclamation of element

Determines the market for innovative goods and services

Demand The willingness and ability of consumers, firms and public sector organizations to be intelligent and demanding customers and to purchase novel products and services. Ability to sell new products and services abroad will be vital if necessary economies of scale are to be realized. The propensity of consumers to buy novel products and services is a function of national culture, per capita income etc., while that of firms will be much more endogenous to the NIS; the more innovative are firms the more they will buy innovative inputs from their suppliers. However innovation policy makers will be particular interested in public procurement where governments have direct influence on markets and can create demand for innovative products and services.

Human Resources

This includes the supply of qualified scientists and engineers, trained craftsmen and technicians, and well educated and trained managers. This is an area where the OECD is currently trying to improve the availability of internationally comparable data. Government policies related to higher education, training and university research can have a strong influence on the availability of domestically produced human resources. Polices related to immigration can influence international mobility and the inflow and outflows of workers.

Act as inputs to the innovation process within companies

Finance The ability of firms (a) to generate sufficient internal finance and

allocate it effectively to innovation activities, (b) to raise external finance for innovation on appropriate terms and conditions and which meets their particular

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provide financing for business innovation, either directly though R&D and innovation subsidies (sometimes linked to specific government needs) or indirectly through tax incentives and other means. A range of government policies can influence the availability of external financing, especially for new technology-based firms.

Physical Inputs

The ease with which domestically based firms can obtain supplies of components, materials, services, capital equipment and software. Inevitably all firms will rely significantly on supplies from abroad, although in the case of some OECD countries these may be obtained within regional clusters which span international frontiers. Access To Science, Technology And Best Business Practice

The sources of technological, scientific and technological knowledge and related knowledge of business best practice and the means by which firms can access them. Sources will include universities, R&D service companies, national, regional and local R&D support organizations, customers, suppliers, other firms generally, inter-

national collaborative programs, business support organizations such as chambers of commerce, as well as a variety of government programs. Means will include networks and clusters, supply chains, seminars, exhibitions

licensing, publications, mobility of qualified personnel, government support programs, etc.

Determines the likelihood of a company innovating

Ability And Propensity Of Firms To Innovate

Ability and propensity of firms to innovate. The ability of firms to use external resources (people, finance, technology, bought in supplies) to develop high value added products, processes and services that meet customers’ needs and generate the revenues needed to finance its activities. This will include the effectiveness of

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internal innovation and other business processes as well as the ability of firms to develop effective organizational structures, ways of working and culture which allows and encourages managers and employees to give of their best. The ability of firms to interact effectively with their external environment, to identify and seek out the inputs they require and to formulate appropriate strategies for survival, growth and coping with change is also crucial.

Effectiveness Of Market Processes

This is the extent to which the interaction of

firms and other factors in the market place is conducive to innovation. In

particular competition provides an important stimulus to innovation while

innovation is one of the most important ways in which firms compete. Similarly while the removal of entry barriers to markets is conducive to innovation, firms will try and innovate in ways that make it difficult for other firms to match them in the market place. Even if they succeed the

until the associated IPR expire. Radical innovation is one way in which existing entry barriers can be overcome and the competitive advantage of incumbent firms eroded. The ability of an economy to foster the creation of new firms and en courage their subsequent growth and development plays a vital role in innovation and the ability to adapt to changing economic circumstances and exploit new opportunities. These processes will be affected by competition policy, other regulatory policies particularly those affecting new firm creation, standards and the IPR regime as well as by trade policy.

Are the environment within which the firm operates

Networks, Collaboration And Clusters

Markets are one way in which firms and other agents interact, networking and collaboration are the others. Networks play a key role in the transmission of

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knowledge and information because markets are not very effective in doing this. Collaboration enables firms to share risks and costs and give them access to complementary capabilities which they do not possess themselves. Clusters involve both market relationships and networking, typically require geographical proximity, and give firms the advantage of external economies of scale and scope including externalities. Analysis carried by the TIP Working Party and by Michael Porter suggests that the degree to which the NIS is networked and exhibits inter-firm collaboration and clusters has a significant effect on the rate of successful innovation. Numerous policies have been pursued in OECD countries to foster networking and collaboration. Institutions

And

Infrastructure

This covers a wide range of organizations, facilities and systems. Most important to innovation are universities, public research organizations (PROs), organizations which provide R&D support and/or links with the research base, education and training institutions, professional societies, government departments, transport and communications, a range of business support organizations, financial institutions, etc.

Business Environment

This covers framework conditions such as macro- economic stability, company and commercial law, etc. It should also include non firm specific aspects of business culture, the lore and practice and unwritten rules which govern how business is done. Corporate governance which may have

significant impacts on corporate strategy and attitudes to innovation and risk is also included. Attitudes towards starting a business, bankruptcy, etc., are also

Table 2 Elements That Determine National Innovation Performance Tabulized version of Page 233 to 234 Innovation Policy and Performance: a Cross-Country Comparison (Organization for Economic Co-operation and Development, 2005)

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With increasing globalization some may doubt the relevance of the idea of an innovation systems based on a nation level perspective. The doubt is particularly relevant with the distribution of multinational company research facilities and the increased mobility of workers who are more easily able to work overseas (particularly in Europe). It is clear that these factors do indeed make the study of national innovation systems more complex. Many researchers such as Porter, Lundvall and Luo believe that the NIS view is still relevant within an increasingly globalized world. Indeed Luo explains this by saying “The concept of the national (innovation) system maintains its significance because the required adaptation to the new paradigm is still largely done at the national level” (Luo, 2001)

The importance of an effective national information system is not to be underestimated because it provides the foundations on which firm level innovations is built. Porter emphasizes this role “the intuitional structure (of the NIS) provides external factors which are necessary to firm innovations strategies but cannot be afforded by individual companies” Porter quoted in (Liu & Chen, 2003). Weakness in a nation’s NIS systems hinders firm level development and reduces national competitiveness.

1.3.2 Measurement of National Innovation

Having discussed the importance of the NIS we must now considers how innovation can be measured and how the performance in different national innovation systems can be compared.

Whilst giving a more comprehensive understanding of national innovation the NIS perspective is inherently more complex to measure and asses than more traditional linear systems. As such a number of different approaches in analysis have been attempted and as the Hu and Mathews commented there is still no consensus on the most suitable system (Hu & Mathews, 2005).

Measurements of Innovation outputs

The measurement of innovation may be conducted

in multiple ways one common indicator is to measure it through its effect on the economy. GDP – Is the total of income received by wealth generating sectors of the economy:

manufacturing, service, agriculture, mining etc. In order to

make more accurate comparisons GDP may be adjusted by scaling the currency using PPP ie estimating the equivalent purchasing power using a comparison a range for basic product and service costs.

GNP – In contrast to GDP GNP includes total national income and also the money that domestic companies earn overseas minus what overseas companies earn in the country and expatriate.

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This approach is particularly suitable for countries with high GDP and whose growth is considered to be principally attributed to innovation2. The key indicators used for this field are items such as GDP level, GDP growth, and GDP per capita see Table 3 Explanation of GDP &GNP Care must be taken with these measures to account for additional factors that alter these indicators or create apparent change. Particularly of concern are significant price variations in natural resource prices especially oil, remittances and the effect of large scale FDI. It has been suggested that for some economies GNP may be a better measure of economic growth (Forfas, 2005).

The economic performance of innovation based sectors such a high technology and their proportion of national output may be used to give a clearer idea of performance.

Another method that may be used at a regional or national level is to undertake large scale surveys. These vary from the simple task of asking firms if they consider themselves innovate 3 to examining innovation output. At a firm level innovation output may be measured by the proportion of turnover that comes from new products and processes. The speed of new technology adoption, technological processes and the use of business best practice as well as patenting activity may describe innovation within a firm (Organization for Economic Co-operation and Development, 2005). Surveys may also be undertaken to examine the diffusion of specific practices or technology, by the use of careful questions the adoption of technology can be measured. The OECD warns that “since innovations take considerable time to defuse surveys covering only a single country need careful interpretation”.(Organization for Economic Co-operation and Development, 1997)

The European Trend Chart on Innovation warns that national innovation systems cannot be measured by quantitative data alone without considering the structural and institutional elements on the NIS (European Commission - Enterprise Directorate General, 2005).

At the national level patenting is often used as a measure of innovation performance, national patents are used to examine the inventiveness of a country or of sectors within a country. Patent levels drawn from national patent offices are only able to indicate the invention they cannot measure commercialization or diffusion of innovations. Thus when a more specific indicator is needed to include more of the innovation process and to allow comparison of different nations the number a patents granted by the US Patent and Trademark Office is used (for international comparison purposes this is normally combined with factors such as

2

Within the context of the Global Competitiveness Report these countries are classed as stage three economies

3

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population). This is based on the fact that the resources and costs needed to register a patent at the United States patent office would only be justified if applicant seeks to commercialize the patent. In addition “the use of US patents (as in indicator) helps ensure a standard of technological excellence that is at or near the global technology frontier…International patents constitute the best available measure of innovation that is consistent across time and location” (Furman, Porter, & Stern, 2002).

Some sources make use of patent applications rather than parents granted notably Eurostat and The OECD. An attempt at the standardization of patents as a measurement method has been undertaken by the OECD and their Oslo Manual – Proposed Guidelines for Collecting and Interpreting Technological Innovation Data (Organization for Economic Co-operation and Development, 1997), despite some criticism this text of often consulted (Feinson, National Innovation Systems Overviews and Country Cases, 2003)(Acs & Varga, 2002)(Yim & Nath, National Innovation Systems in the Asian Context, 2005).

Extensive research has been undertakes to assess the suitability of patenting as an indicator (Eric, 2002)(Abrunhosa, 2003) and this method is not without its problems see Table 4 Problems With Patents as an Innovation Indicator

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Caveat Source Incompleteness – many patents are not patented since

patenting is only one way of protective and invention

(Eric, 2002)

Inconsistency in quality – the importance and value of patented inventions vary considerably

(Eric, 2002)

Inconsistency across industries and fields – industries and fields vary considerablably in their ability to patent inventions

(Eric, 2002)

Inconsistency across countries – inventors from different countries have a different propensity to patent inventions and countries have different patent laws

(Eric, 2002)

(For systems that use patent applications)

Patent application does not reflect success rate - often application rates vary from country to country (even for US Patents) making comparison inaccurate

Derived from comments by (Eric, 2002)

Inability to represent full range of innovation – service innovation often rely on processes that cannot be patented

( Milberge E / IBM Corporation, 2004)

US patent application may be for reasons other than commercialism– due to patent law differences applications may be made that to cover areas that are not patentable in the home market (notably software patents that have not been available in most of Europe).

Author’s Own Research

Limitations on data accuracy/comparability - statistics produced by patent offices my use different bases as measurement of origin of patent. The USPTO determines the national origin of the application by the nationality of the first applicant listed

Author’s Own Research

Many patents are not commercialized and therefore do not contribute to national innovation – even patents that are filed overseas (e.g.in the USPTO) are often not commercialized

(Organization for Economic Co-operation and Development, 2005)

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1.3.3 National Innovation Capacity

In order to provide a quantitative way of comparing national innovation systems and assessing national innovation capacity Furman, Porter and Stern combine three areas of theory/research (summarized in Table 5 Foundation theories of NIC ) with data taken from the Global Competitiveness Report and US patent data

They describe national innovative capacity as “a county’s potential – both as a political and economic entity – to produce a stream of commercially relevant inventions” (Porter & Stern, The Impact of Location on Innovation: Findings from the National Innovative Capacity Index, 2002). And note that it attempts to measure the basic conditions that form the innovation environment in a particular location rather than simply realized innovation.

1. Endogenous Growth Theory Romer 1990

The economic theory suggests that improvements on productivity can be directly linked to faster innovation and additional investment in human capital. As such knowledge is believed to be a central determinant in economic growth

2. Cluster Based Theory Of National Competitive Advantage

Porter 1990. 1998, 2000

This theory supports the view that a geographic concentration of an industry, it’s peripheral and supporting industries as well as of suppliers, consumers, suitable government and supporting institutions such as educational establishments creates a positive symbiotic effect benefiting the national economy and innovation

3. National Innovation System Lundvall 1987, Nelson 1993

This research investigates the factors that contribute to a strong national innovation system especially government policy, tertiary education and country specific institutions.

Table 5 Foundation theories of NIC

Note the following is based on (Furman, Porter, & Stern, 2002)(Porter & Stern, National Innovative Capacity, 2001)(Porter & Stern, The Impact of Location on Innovation: Findings from the National Innovative Capacity Index, 2002).

Furman et al examined the statistical relevance of factors take from models based on the three theories. Analysis was undertaken by regressing the 1999 – 2000 level of national patenting (taken from a the USPTO ) on total population, the proportion of scientists and engineers and a metric of patent stock generated by the country between 1985 and 1994. They note that “80 percent of total variance in international patenting across the world, controlling for population, can be explained by these two determinants of national innovative intensity”(Porter & Stern, National Innovative Capacity, 2001).

This created a baseline which was used to examine via regression the difference between predicted performance and innovation variables taken from the Global Competitiveness

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Report. Where statistical significant was found interrelated variables were correlated and those that had a high correlation were used as a basis for the reduction of variables. Associated variables were then formed into sub indexes as shown in Table 6 National Innovation Capacity Sub indexes (Furman, Porter, & Stern, 2002)

:

The innovation policy sub index

The effectiveness of intellectual property protection

 

The ability of a country to retain its scientists and engineers

 

The size and availability of R&D tax credits for the private sector

 

The cluster innovation environment sub index

The sophistication and pressure to innovate from domestic buyers The presence of suppliers of specialized research and training The prevalence and depth of clusters

The linkages sub index

The overall quality if scientific research institutions

The availability of venture capital for innovative but risky projects

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Figure 4 Concept of the NIC framework

The explanation for the importance of these variables lies in the National Capacity Framework created from three theories discussed at the beginning of this section (shown in Figure 4 Concept of the NIC framework).

Common Innovation Infrastructure

This is the total human and financial resources dedicated to innovation and technological advancement, the national policies that affect innovation and the current level of technological complexity. The foundation of this is the number of scientists and engineers available to the nation.

Cluster-Specific Environment

In order to clarify this element of their work it’d necessary to explain cluster theory. The cluster based theory of national emphasizes the effect that microeconomic factors have on national competitiveness and describes how complementary factors (show in Figure 5 The Innovation Orientation of National Industry Clusters Fulman et al 2002 )can contribute to extremely strong performance in the economy of a geographical location and a specific 1.Common Innovation

Infrastructure

3.Quality of Linkages

2.Cluster-Specific Environment for Innovation

Context for Firm Strategy and Rivalry

Factor (Input) Conditions Demand Conditions Related and Supporting Industries

Figure 3 National Innovation Capacity Framework Furman et al 2002 Cumulative

technological sophistication --- Human capital & financial resources available for R&D ---

Resource commitments

and policy choices

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industry group operating in this area. The presence of clusters in a national significantly increases its competitiveness in the industries that the clusters operate.

These dynamic clusters have the effect of stimulating innovation and competitiveness of firms operating within them. There are three key reasons for this:

• Pressure for innovation; strong competition between firms and suppliers forces the development of new products and services. Customers are demanding and communicate requirements and observations back to the firms.

• Transfer of knowledge; between firms and institutions such as incubators, universities and research groups. Flow of retained knowledge between employees as they move between firms.

• Concentration of resources; infrastructure and facilities that aid innovation are more readily available. Such are testing facilities, venture capital funds.

• Presence of capable local suppliers and related companies

• Presence of clusters instead of isolated industries

• Sophisticated and demanding local customers

• Home customers needs that anticipate those elsewhere

Context for Firm Strategy and Rivalry Demand Conditions Factor (Input) Conditions Related and Supporting Industries

• A local context that encourages investment in innovated- related activity • Vigorous competition

among locally based rivals

• High quality human resources, especially scientific, technical, and managerial personnel

• Strong basic research infrastructure in universities

• High quality information infrastructure

• An ample supply of risk capital

Figure 5 The Innovation Orientation of National Industry Clusters Fulman et al 2002

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Linkage Quality

The examines the strength of the relationship between industrial clusters and the common innovation infrastructure this relationship is reciprocal in that common infrastructure benefits from strong clusters and that clusters benefit from strong infrastructure. Universities play a major role in providing this link but other networks and organizations may also be significant. Weakness in this link means that innovation is not diffused to clusters and that they will be unable to take advantage of university research etc.

Within this thesis we will examine both Ireland and Taiwan’s innovation capacity using the indicators developed by Fulman et al elements that contribute to these indicators as the basis for the discussion of national innovation and the NIS system. As well as considering the economic effect of innovation

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2. National Context and Background - Ireland and Taiwan

2.1 Ireland

2.1.1 History

The history of the republic of Ireland begins with its founding in 1921. Prior to the establishment of the republic it had be part of the United Kingdom and had been ruled by Britain. In 1916 an uprising against British rule took place which became known as the Easter uprising or Easter Monday rebellion despite its failure the uprising acted as a catalyst for a period of guerrilla war aimed at gaining independence for the British. This campaign met with success however it did not result in the whole of the island becoming independent, it resulted in the Government of Island act 1920(BBC , 2006) which partitioned the island into 6 northern counties under British control and 26 countries that would become the republic (at the time called the Irish free state). This solution proved controversial and was not accepted by many citizen, the split between supporters of the treaty and opponents became the basis for a two year long civil war. With the coming of the Second World War, Ireland declared itself neutral, and was less affected than other European countries.

Throughout the 1960s and 1950s, the country suffered from emigration on a vast scale, due to the limited employment opportunities at home many were forced to emigrate. This echoed the wide scale emigration that had taken place a century earlier, under British rule. In Northern Ireland sectarian violence continued until the organizations involved, the Irish government and the English government negotiated the Good Friday agreement in 1999.

2.1.2 Economic Development

On independence the country had little industry as the industry that had been on the island was concentrated in the 6 counties of Northern Ireland this mean that the country was mainly agricultural. Partly due to economic thinking and partly due to its history 4, the government of Ireland pursued a policy of economic nationalism. Import substitution and tariffs were used to protect and develop Irish manufacturing. Given that the home market was barely 3 million it is not surprising that this effort at self sufficiency failed. Aware of this failure the government actively attempted to attract FDI from 1956 onwards by offering tax incentives, relaxing controls of foreign ownership and by developing infrastructure. However the

4

Primarily the problems of its relationship with the economically stronger UK due to history associated with the colonial period and the issue of Northern Ireland

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country continued to suffered from high levels of poverty and emigration for the next two decades (Dorgan, 2006) Realizing that trade was needed to develop the economy Ireland joined GATT in 1967 and applied to become part of the EEC. In 1973 Ireland joined the European Community, which although it had little immediate effect resulted in transfer payments being made amounting up to 4% of GDP per annum. These payments were primarily used to benefit the education system and improve physical infrastructure. These improvements met with some success in attracting overseas investment when companies such as Pfizer helped GDP growth rise to 8.2% Figure 6 Ireland GDP Growth . Excess government spending and economic mismanagement created underlying problems that resulted in slower growth in the early 80’s By 1985 the nation faced inflation averaging 11 percent per year, unemployment of 15 percent and a vast national debt. Between 1981 and 1990 200, 000 people emigrated (Dorgan, 2006) and unlike previous waves of emigration many of these were university graduates. In order to cope with the crisis the government introduced a radical 3 year national recovery plan, government spending was slashed, and national partnership agreements were put in place between the government, employers and unions. These agreements involved restricting pay rises and introducing tax incentives. While reducing government spending in many sectors investment was made in telecommunications infrastructure in order to target the financial services and software sectors. Ohmae suggested that the previous industrial failure was at this point seen as a benefit ”It meant that there was no rusting industrial plants and no unemployed workforce born and bred to heavy industry…Ireland could start from scratch”(Ohmae, 2005). The economy picked up and by 1992 the concept of Ireland as the e-hub of Europe had been developed(BBC , 2006).

The economy has continued to prosper and significant foreign direct investment has been attracted. Ireland has become the European research base for a number of pharmaceutical companies, it is also the location for manufacturing plants for large international companies such as Dell and IBM. In addition it’s beautiful scenery and unique history has lead to the development of a strong tourist industry(Ohmae, 2005).

2.1.3 Economic Summery

Driven by FDI the Irish economy has grown considerably over the past few years. The economy is presently dominated by foreign firms particularly American. As the cost of Irish labor increases FDI inflow is expected to slowdown, consumer spending and local

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investment increase. Current unemployment levels are around 4.5 % and inflation 2.2%.(Department of Foreign Affairs and Trade, Australia, 2006).

GDP -Composition by sector agriculture 5%

industry 46%

services 49%

Labor force by occupation agriculture 8%

industry 29%

services 64%

1 Metal Mining/Processing

Top 5 Major industries in size order

(based on value of annual output) 2 Food Products

3 Brewing 4 Textiles

5 Pharmaceuticals

Currency Euro

Languages English (Official) Major

Gaelic (Official) Limited use

Between 1990 and 2005 significant amounts of foreign investment flowed into Ireland. These investments were driven by its location, human resources and infrastructure. But they were also attracted by tax relief on export profits and well as a generous program of grants. (United Nations Conference on Trade and Development, 2005)

FDI inflows (USD million)

2002 2003 2004 World rank Foreign Direct Investments (F.D.I.) 28981 26888 9120 15 / 197

Foreign Investment Share (2001 data):

United States 43%

United Kingdom 13%

Germany 13%

Other European countries 22%

Japan 4%

Others 5%.

2.1.4. Economic Issues

Although the Irish economy has experienced strong growth in recent years some problems exist in the current economy.

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• The threat that manufacturing plants may be relocated to lower cost areas of eastern Europe which are entering the EU

• The need to proactively develop clusters

• Indigenous firms not competitive (Roper, Regional Innovation Policy: An Effective Way of Reducing Spatial, 2004)

• Over dependency on centralized government planning (Porter, Irish Competitiveness: Entering a New Economic Era, 2003)

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2.1.5 Regional environment

Ireland is an island located in Northern Europe, the republic shares a land border with Northern Ireland. According to the CIA world factbook it is a strategic location on major air as sea routes between the US and Europe. This is because of its proximity to mainland Europe and because it is the first country encountered by traffic coming across the Atlantic. Its closest neighbor is England (some 40 kilometers away) which has a population of approximately 60 million and GDP per capita of $31, 400. In addition it is one of only two counties in Europe which use English as a first language (the other being the UK). The country is a full member of Europe 5and Ireland replaced the Irish pound with the euro in 2002. This

enables it to conduct trade with other eurozone countries without currency risk see Figure 7 Eurozone Map.

2.1.6 Geography

The country is relatively flat in the north and east with low rolling hills in the interior, on the west coast there are high sea cliffs and lightly inhabited mountain areas. The capital Dublin is located in the east and is surrounded by jagged hills. The population density is 58 people per square kilometer 6with 40% of the population living within 100 km of Dublin.

5

Joined 1973

6

See appendix 2

Figure 7 Eurozone Map

█ Eurozone countries

██ EU states aiming to join Eurozone on 1 January 2008

██EU states bound by the Maastricht Treaty to ultimately join the Eurozone

██EU states with a derogation on Eurozone participation

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2.1.7 Political Environment

Although recent elections have been fiercely competed the political situation is relatively stable, the current government, is a coalition of Finna Fail and the Progressive Democrats. For most of the postwar period the government has been in the hands of Finna Fail. The current president, Mary McAlees was elected to a second term in office when no other candidate was offered. Both parties are considered to be center right and the economic issues are often the main topic for political discussion (Department of Foreign Affairs and Trade, Australia, 2006).

The country was rocked by corruption scandals in 2002 when a tribunal found that a minister called Ray Burke had received payments from businessmen between the early 70’s and late 90’s. This had the effect of damaging the reputation of the Fianna Fail Party that has been in power for the majority of the past 40 years.(Helm, 2002) One way of examining the corruption of public officials is the Corruption Perceptions Index produced by Transparency International in cooperation with the University of Passau. This survey asks businessmen a number of questions to assess their perception of the level of corruption for public officials within a certain country. The results of this

survey give Ireland a score of 7.4, Figure 8 Ireland Perception of Corruption shows the score in comparison with selected countries indicating that corruption is of a similar level in other major economies such as the United States and France.

The European Union of which Ireland is a member is in dispute with a number of countries not least the United States over steel production. The union has also taken action against some MNC’s including the software giant Microsoft whose European headquarters is in Dublin. However as an individual country Ireland is only involved in a minor territorial

Country Score - Lower Score Means More Perception of Corruption China 3.2 South Korea 5.0 Japan 7.3 Ireland 7.4 France 7.5 United States 7.6 Germany 8.2 Hong Kong 8.3 United Kingdom 8.6 Denmark 9.5

Figure 8 Ireland Perception of Corruption Transparency International and

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disagreement with Denmark over fishing rights. Due to the perceived lack of threats and its neutrality Ireland maintains a small sized military and spends only 0.9% of its GDP in defense. Generally Irish troops are only sent overseas in minor peacekeeping roles or used in civil emergencies.

2.1.8 National Resources

The population of Ireland is 4,062,235 - 67% of which are between the age of 15-64. In 2002 there were 5.3 researchers per 1000 Workers.

The country has limited amounts of oil and gas which are insufficient to meets its own needs. Ireland has mineral resources in the mountainous western areas, comprising of reserves of zinc, silver, aluminum, barite, and gypsum. These are mined and are a source of export revenue although this revenue is not significant in the context of the present economy.

2.1.9 Culture

Ireland retains a strong national culture focusing on its Celtic history and the struggle for independence.

The country is predominantly 88.4% catholic and 60% of these attend church regularly. (Central Intelligence Agency, 2006)

The national culture framework developed Geert Hostede’s gives Ireland the followings scores:

Power Distance Index – 28

This is slightly lower than Britain and Germany (35 each) and far lower than France 68.

It means that Irish citizens are less likely to accept unequal distribution of power within society and organizations. Therefore they have a strong belief in equality for each citizen and that people have the opportunity to rise in society.

Individuality Index - 70

The level of Individuality was high and similar to other northern European cultures although slightly less than other “Anglosphere” cultures. Subordinates in Ireland are expected to be free thinking and independent, and emphases is placed on individual performance more than the collective.

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Masculinity Index - 68

Ireland is a country that scores highly on in the masculinity dimension from the countries studied in Hostede’s work it comes 8th. This is indication that men value traditional male concepts such as strength, assertiveness, individual achievements, self-centeredness, power and materialism. It also suggests a gender gap due to these differences in values and the associated role perspectives in the workplace.

Uncertainty Avoidance Index – 35

This indicated is used to judge a cultures tolerance of uncertainty and ambiguous situations. Societies with high ratings will try and avoid uncertainty, Ireland is not one of those societies and is highly tolerant of uncertainty. Its rating in this dimension is near the bottom of the table.

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2.2 Taiwan

2.2.1 History

The island of Taiwan has a long and complex history and has been ruled by various colonial powers, by imperial China and by those that opposed the contemporary rulers of China.

In 1895 Qing dynasty China was defeated by the Japanese during the Sino-Japanese War as part of the Treaty of Shimonoseki Taiwan (and surrounding islands) was permanently ceded to the Japanese who attempted to invade in 1874(http://www.taiwandc.org/history.htm, 2005). This annexation was resented by many Taiwanese, some of who declared the formation of the Republic of Formosa, the resistance movement was eventually suppressed by the Japanese. During the controversial period of Japanese rule a program was undertaken to develop local infrastructure including transportation, health and education for what the Japanese now thought of as part of Japan. Agriculture and industry was developed, Taiwan became a major exporter to Japan and her other colonies. Exports mainly consisted of agricultural products such as pineapples, sugar cane and rice, but timber and gold were also exported. With Japans defeat in the second world war Taiwan was returned to China. By this time the 1911 revolution in China had replaced the imperial Qing dynasty with Kuomintang (Nationalist Party of China) in some parts and in communist administration in others. The Republic of China had been declared by the Kuomintang (KMT) who continued to fight the communists. The first few years following the handover were a difficult period for Taiwan with many clashes between the military administration and Taiwanese notably the 228 incident. This period began a political polarization (Mainlander VS Taiwanese) of Taiwan that is still evident in Taiwan today. A further 1.3 million people moved to Taiwan from the mainland when the KMT under Chiang Kai-shek lost the Chinese Civil War and relocated the Republic of China to Taiwan(BBC, 2006). The financial reserves they carried with them helped stabilize Taiwan’s economy that had been undergoing stagnation and hyperinflation. The KMT intended to retake China and initially saw Taiwan a location to rebuild strength in order to do so. This was one reason for the period of martial law that lasted until 1987 when gradual democratization began. In the 1970’s many nations ceased to recognize the ROC on Taiwan as the legitimate representatives of China and the ROC left the United Nations. Currently the ROC is recognized by very few countries and Taiwan is in limbo. The PRC continues to claim Taiwan as a province of China (it is officially supported in this claim by

數據

Table 1 Linear Innovation Process
Figure 2 Actors and Linkages in the National Innovation System
Table 4 Problems With Patents as an Innovation Indicator
Figure 4 Concept of the NIC framework
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