Institute of Development Studies

Changing Knowledge Divide in the Global Economy

The starting point for this project was a fundamental change occurring in the way innovation was organised in the developed countries: it tended to be centralised at or near headquarters but had become much more decentralised within the company. Equally if not more significant, innovation activities that used to be carried out in-house by innovating firms themselves were being carried out by independent suppliers of knowledge intensive business services, or were being transferred to key suppliers. The question driving this project was how this 'organisational decomposition of the innovation process' (ODIP) was changing the global distribution of innovation activities. Was it contributing to their global dispersal to the developing world or strengthening the existing concentration?

This question was examined for the manufacturing sector - taking the case of the automotive industry - and the services industry - taking the case of the software industry. Both industries were studied in a developed country context - taking the case of Germany - and in a developing country context - taking the case of the Indian software industry and the Brazilian auto industry.

Answering the main question required unpacking ODIP and developing typologies of different processes, actors and actor constellations. These typologies helped to structure the empirical analysis and bring out the different patterns and trajectories of ODIP in the auto and software industries. The main overall conclusions are:

• The different types of ODIP are reinforcing each other, not just in developed but also in the developing world.
• As regards the spatial implications of ODIP, both concentrating and dispersing forces are at work but over time global dispersal of innovation activities has become stronger.
• While most of this dispersal is limited to non-strategic (problem solving) activities, strategic (problem framing) innovation activities are beginning to emerge in the developing world.
• The rise of innovation capabilities in the developing world accelerates the organisational decomposition in the developed world. A reverse causality has begun to kick in.

The project provides conceptual frameworks and analytical tools which can be used for examining these processes in other sectors and countries. One of the main lessons from this project is that tracing the connections across firms and continents is a time consuming process - more so than anticipated at the start of the project.

• IDS key contact: Hubert Schmitz
• Project dates: January 2006 - December 2009
• Project status: Closed
• Funder: Volkswagen Foundation

Researchers

• Hubert Schmitz
• Rasmus Lema
• Simone Strambach, University of Marburg
• Ruy Quadros, University of Campinas

Selected Outputs

• Lema, R., Quadros, R. and Schmitz, H. (2012) 'Shifts in Innovation Power to Brazil and India: Insights from the Auto and Software Industries', IDS Research Report 73, Brighton: IDS
• Lema, R., Quadros, R. and Schmitz, H. (2010) 'Innovation in the Brazilian Auto and Indian Software Industry: Insights into the Organisation of Knowledge Creating Activities in Global Value Chains' , draft, to be published as an IDS Working Paper, Brighton: IDS
• Lema, R. (2010) 'Adoption of Open Business Models in the West and Innovation in India’s Software Industry', IDS Research Report 62, Brighton: IDS
• Quadros, R. (2009) 'Brazilian Innovation in the Global Automotive Value Chain: Implications of the Organisational Decomposition of the Innovation Process' , Universidade Estadual de Campinas
• Schmitz, H. and Strambach, S. (2009) 'The Organisational Decomposition of Innovation and Global Distribution of Innovative Activities', International Journal of Technological Innovation, Learning and Development 2.4:231-49