"Innovation and Business Partnering in Japan, Europe and the United States" edited by Ruth Taplin

Reviewed by J. Sean Curtin

Review:

As the juggernaut of globalization relentlessly races forward, the importance of global innovation is becoming a crucial factor in economic competitiveness. This book assesses the different innovation strategies small and medium-sized enterprises (SMEs) are adopting in Japan, Europe and the United States. It also explores the European Union's chances of being able to meet the innovation challenge posed by Japan, China, India and the United States – planet Earth's four most dynamic innovators. Business partnering is seen as an essential strategy for SMEs to keep their competitive edge.

Humanity is riding a breakneck innovation rollercoaster as the stock of scientific knowledge incredibly doubles every five years, creating the potential for breathtaking advances. In a world where some new technologies may have the capacity to reshape the global economy, innovation has become the critical factor in the battle for global economic survival. It's an arena in which Asia's position is continually strengthening while Europe needs to take swift action if it is not to fall behind. New technologies, shorter product development lead-times, revolutionary new business models and concepts along with lower labour costs are giving China and India a crucial edge in this make-or-break element of the global economy.

This book argues that the innovative abilities of small and medium-sized enterprises (SMEs) hold the key to future economic success. This is especially the case for Europe which cannot hope to keep up with its competitors without more innovative SMEs. A new SME model for Europe is proposed based on business partnering and collaborative alliances for new ventures and high-technology research and development. This strategy offers a viable alternative to mergers and acquisitions (M&A) as it allows companies with limited resources to maximize their individual strengths and drive forward investment in innovation.

Today, it is not just Japan that invests heavily in innovation, China has tripled its spending on research and development (R&D) over the past five years, while India produces more science graduates each year than the whole of the EU combined. East Asia is also galloping ahead in the area of intellectual property (IP) with China, South Korea and Japan accounting for about 25% of all registered patent applications globally.

In a series of highly readable essays written by international experts the book (i) explores the rapidly shifting global innovation landscape and the value of business partnering for SMEs; (ii) analyzes the importance of SMEs in pushing forward Japanese innovation; (iii) examines the challenges facing the EU and suggests suitable solutions; and (iv) looks at American models for sustaining a position as a leading global innovator.

Takuma Kiso and Akio Nishizawa provide a wealth of material on Japanese innovation strategies which has not before appeared in English, making this book an excellent resource for those who want to understand more about the dynamics of Japanese innovation. Other chapters examine innovation in the United States and European countries. In the introductory chapter, "Business innovation globally at a crossroads," Anthony Murphy analyzes the situation from a global perspective, setting out some of the challenges facing the European Union. He observes, "In the near future the world will be in the grip of the claws of the Chinese dragon and the Indian Tiger."

In a chapter entitled "Can Europe make it?" Ruth Taplin explains why many large European companies have been able to adapt to the fast moving changes created by the global innovation challenge, but crucially many SMEs have not. Most large companies in Europe have developed in size through M&A, unlike in the US where many big companies have grown out of smaller ones (75 percent of large US firms founded since 1980 have grown from small beginnings). This has meant that while many large companies in Europe are moving explicitly to a new model of corporate innovation, pro-actively building a global network of innovation partners, and setting up cost-sharing innovation consortia, at the other end of the spectrum a great many European SMEs are doing little and failing to fulfill their potential.

The reasons for European shortcomings are examined utilizing new case studies from SMEs in the UK, Scandinavia and Eastern Europe. This stimulating chapter has some great insights into the innovation dilemmas confronting European SMEs. A major reason for their lack of success is that R&D costs for innovation are beyond the means of the average European SME, which undertake seven to eight times less research activities than their American counterparts. This comparative weakness is all the more acute in light of the fact that SMEs account for 65 per cent of European GDP, but only 45 percent in the US.

This book provides a global perspective on key economic trends as well as offering some excellent comparative material on Japan. It makes an important contribution to our understanding of the dynamics of global innovation and business partnering.

(This review was produced in collaboration with the Japan Society (UK).)