Chapter 3 summarize by Group 5

3.1 Introduction
The foregoing analysis in the previous chapters of the book demonstrated that inno- vation
constitutes the foundation and driver of competitiveness worldwide. Starting from its definition and
based on a broad raft of experiences and results, innovation allows the addition of higher added
value in a way that materially prevails constitut- ing probably exclusivity (disruptive and
discontinuous innovations).
For a better comprehension of all the above, it would be wise to quote a case study, for the XEROX
company, where promotion and use of innovation as a recipe of corporate success and profitability
has gone through a historic path. At the same time it is also interesting and enlightening to see the
failure by XEROX in many occasions to commercially capitalize on the technological invention and
innovation for various reasons ranging from lack of imagination or/and courage on behalf of
corporate leadership up to dysfunctional corporate traditions and mindsets.
A critical issue is the presence or absence of ability and readiness for technological learning
particularly at higher levels (learning new ways of learning), (Carayannis 1994a, b, c).
3.2 Innovation-Case Study ΧEROX

3.2.1 XEROX Background and History

In the last years many changes have been observed in what we call old and what we call new
economy. The old, industry-based economy has been traditionally charac- terized by economies of
scale whereas the new knowledge-based economy is con- sidered as the economy of networks
(Shapiro and Varian 1999). The shift from the old to the new economy could be described as a
change of technological paradigm.3.5.2 The Role of Multilateral Development Banks (MDBs), such as
the World Bank in Promoting CIC
The role of Multilateral Development Banks (MDBs) that support innovation in the public and private
sectors is decisive. MDBs may:
• Promote the consolidation of national policies and action plans for CIC, with long term and short
term objectives, but calling for existing pursuits. Train and mobilize the personnel being in charge of
works and activities execution in pub- lic and private organizations. Allocate the necessary resources
and tools for the execution of the appropriate actions and make available ongoing technical
assistance and supervision.
• Create favorable conditions where innovations in developing countries can bear fruit.
• Assist developing countries in properly following the fundamental regulatory and economic
policies so that the conditions that encourage new ventures and
innovation be able to function within the private sector.
• Disseminate worldwide the best practices in developing nations, reinforcing the
private sector institutions so that an enterprise can largely contribute to political
decision making.
• Contribute to eliminating commercial barriers that affect developing countries
and destroy the possibility of innovative growth.
• Spread information, knowledge and successful CIC experiences among member
states.
• Promote CIC through agreements, contracts and integrate it in growth policies.

References 71
For Multilateral Development Banks (MDBs) to be capable to contribute more effectively to CIC
promotion, they should:
• Merge CIC in their administration. The Multilateral Development Banks (MDBs) should assume
joint responsibility (with the countries) for the merger results. This joint responsibility should be
defined at the level of national growth and good living standards of citizens in the target countries.
• Be more creative, innovative organizations, less rigid and less bureaucratic.
• Support governmental projects whose leadership and ownership are held by the government. In
other words, no economic assistance shall be ensured to the government not enjoying independent
ownership of ideas development or
certified leadership.
• Give more flexibility to countries in their effort to find the best way to growth
(not pre-fixed ‘magic formulas’)
• Be more accountable for their breakthroughs as regards national productivity and
competitiveness (Carayannis et al. 2003a, b

3.2.2 Innovation: Sequence of Errors  

 In 1970, Xerox developed the Palo Alto Research Center (PARC), being famous as the
center of computer revolution. PARC researchers were given the ease to conduct basic
research from the beginning. This led, among other discoveries, to the fi rst personal
computer in 1973 and the fi rst laser printer in 1977.  

In order to understand Xerox strategies, researchers are trying to fi nd the solution exploring
the history of innovation of Xerox and taking interviews from basic players of the era. In such
an interview with Mr. RΤ, a Xerox veteran for 30 years and business executive connected
with the control center of the business in West Coast for the largest part of his career, the
following information was taken. 

The market was better delimited with the rise of Apple computer. It is interesting to highlight
that the main attraction of Apple computer was the common graphic surface/desktop/mouse,
an idea borrowed during a visit to PARC. Another point of discussion in Xerox, narrowing
down the market strategy, was the alignment of sales power. Xerox possessed a well-trained
and equipped sales team aligning the photocopy machines with the provision of material
(H/W) and services of added value. For Xerox to capitalize on this novel innovation, the
computer, a sales labor force was required which was aligned with a different fundamental
product—the software (S/W) in the sense that it had the capacity and experience to sell
services (software). Xerox strategy did not take into consideration the re-alignment of its
sales labor force and in particular its remuneration objectives. Xerox had a successful sales
team particularly because its remuneration objectives were very liberal.

Another infl uence on Xerox innovation strategy was the anti-trust arrangement of 1975.
According to this arrangement, Xerox agreed to open the dossier of its intellectual rights
property and issue a license to use some of them previously considered technology of Xerox
exclusive ownership. While the arrangement did not impact directly on Xerox culture, it fi
nally infl uenced its innovation strategy, as proven, by the current Innovation Group
organization

As typically described in the Xerox example, the other side of success is a list of innovation’s
failures. The failures of innovation are summarized as follows: 
1. Management of intellectual property rights—Patenting and taking advantage of
strategically corporate secrets
2.  Influences of diverging mindsets and management strategies of technological and
business risk 
3. Strategic development of markets  
Creativity, Innovation and Competitiveness (CIC)
in Public and Private Sectors
This section, combining sources of literature (including authors), interview fields with
thorough knowledge by academics and professionals, attempts to go deeper into the
practices and consequences of creativity and innovation on competition.
the co-operative interaction between the public, private sector and the main institutions of
cooperation, such as universities, research institutes and non-governmental organizations
(NGOs) in order to establish strategic alliances aiming at higher levels of competitiveness in
developed and developing countries.
In this context:
Governments are in charge of creating a stable and foreseeable political and mac-
roeconomic environment using transparent policies, reinforcing their legitimate rights and
property rights, facilitating the specialized development, creating a business environment
with low transaction costs and offering sufficient incen- tives for creativity and innovation.
• Enterprises should use competition strategies developing specialized networks to achieve
performance (social profit), increase of technological effort intensity (more sources for R&D),
building of new capacities and skills (human and intel- lectual profit) and development of a
modern infrastructure. Suppliers and import- ers of services, materials and infrastructure
should be harmonized with the international standards of quality, distribution and cost.
• Universities and research institutes should be aligned with the development poli- cies and
innovation priorities of the public sector as well as the strategies of the private sector to offer
crucial and critical new capabilities and skills to public and private bodies through
appropriately targeted research. Non-governmental orga- nizations (NGO) should serve as
empowering agents, catalysts and accelerators of activities of public and private
cooperatives.

The institutional high level knowledge completing the business knowledge as it evolves
serves as a catalyst and accelerator of economic growth.
It contributes to the convergence of developed and developing countries as well as to
technology transfer from the developed to the developing countries and between public
sectors, private sectors, universities, research institutes and non-governmental organizations
Research found that innovation and creativity become all the more important in the public
sector and in the survival and flourishing of the private sector, determin- ing modern
requirements and capabilities in public and private sectors worldwide
Some of the requirements and capabilities of the public sector impacting heavily on the
private sector are described below:
(a) Shrinking of budget and demographic movements with advanced-aged population groups
(b) Higher required production of knowledge by employees achieving enhanced mobility
(c) Increased pressures for responsibility and transparency guided by privati- zation,
globalization and by an increasingly informed and experienced vot- ers’ base
(d) Increased pressure to and by the private sector to become more competi- tive requiring
the comeback of a more competitive public sector
(e) and last, but not least, the Multilateral Development Banks and particu- larly the
International Monetary Fund that encourage and require increase in productivity and
transparency in public and private sector policies, practices and structures.

The public sector requires more aggressive policies to cultivate creativity within its own
administration, to promote innovation inside the government and gradually increase its own
competitiveness. The public sector may promote CIC in various ways:

1. Creating an environment that supports CIC. It involves successive policies, regulations and
provisions that strengthen CIC. Rewarding and granting incen-tives, such as tax rebates, security and
other favorable requirements benefiting from the international experience. Ensuring performing
incentives for research and scientific growth, investing in adequate resources.

2. Utilizing the government's purchasing power (approximately 30 % of the national gross product in
the Latin America countries) to boost competitiveness (along with effectiveness and transparency).
3. Building social security safeguards for those who fail when seeking for discovery and support
mechanisms for those who need additional support to discover/ innovate.
4. Acting beyond market failures, when the private sector cannot act on its own due to
lack/asymmetry of information or due to scale problems. Taking all this into account, the promotion
of non-traditional exports or grants for technological innovation in small or medium-sized
enterprises are some examples.

5. Trying to merchandise research that was produced by the public sector, e.g. federal laboratories,
Ministry of Defense, Administration of the National Aeronautics Center.

6. Building an adequate innovation system. The main focus areas relate to research and innovation
networks, technology transfer and innovation programs (scientific and technological parks).

7. Offering the available resources for basic research. These resources could create an environment
that would be less prone to applied research and more inclined to 'theoretical' research.

3.5.1 Public-Private Partnerships Promoting CIC

In developed countries, when markets operate more effectively with the private sector participation
for CIC development they are more sustainable. The public-private sector partnerships (PPPs) are
realized to allow a higher level of private sector participation in predetermined enterprises/areas
despite the relatively higher level of competition and the lower profit margin.
Some areas of the private sector need support by the public sector to improve innovation,
competitiveness and creativity. In addition, the support of new ideas and initiatives is required
(research of applied sciences or construction of technological breakthroughs).
Summarizing the description of recognition criteria of possible initiatives/ideas to conclude
cooperatives between public/private sector, criteria and processes for the selection of private sector
objectives and conditions, the following could be put forward:
1. Priority of governmental areas
2. Possible practical application and gain for society or economy too
3. Low cost or profitable venture
4. Long term venture
5. Candidates with integrity and sufficient economic resources
6. Willingness for change
7. Competitive spirit
8. Vision for the future
9. Additional experience and resources

Key Figures of Innovation and Creativity

In public and private sectors, innovation can be understood as a way to re-examine
and reorganize the government, updating—replacing public services/public organi-
zations, managing/guiding the change of the process, modifying the structure of
programs and the distribution service, re-designing and improving the distribution
service for the citizens, re-planning the responsibility of the working framework
and measures performance, strengthening the suppliers of public services and pri-
vate companies.
Drivers of Innovation-Catalysts
and Prohibitive Factors
Based on our empirical findings, there exist factors acting in a catalytic or prohibitive
manner to creativity, innovation and competitiveness in the public and private sector.
Catalysts:
1. Political guidance, far-sightedness, strategic plan (with the right objec-
tives). Relative organizational autonomy and firm willingness on behalf of
leadership for innovation.
2. Innovation/creativity rewards the system in the right position.
3. Protection of intellectual property rights.
4. Favorable organizational environment for the conversion of tacit ideas and
knowledge into clear proposals for improvement: Open and frequent com-
munication and dialogue, strategic interchange among various functions
and technologies and access to information (Nonaka and Takeuchi 1995).
5. Correct mix of people and team spirit are manifested in well functioning
groups.
Barriers:
1. Reactions coming from elected or appointed experts who are predisposed to
‘thoroughly examine’-in order to delay-innovations.
2. Innovation fails due to resistance to change: the failure of courage and
imagination may prove to be significant barriers to innovation.
3. Feeling of ‘comfort’: Why should I press myself and disrupt my comfortable
habits? Conservatism in multiple forms, e.g. ‘do not change the status quo’
syndrome, ‘no risk policy’, ‘lack of no certified alternative solutions’, ‘do
not omit the pre-determined course’.
4. Lack of courage by government executives to deal with the challenges and
the problems, fear of losing the support of voters accompanied by a lack of
long term vision (focus only on short term benefits), instability and wide-
spread re-shuffling of executives in their positions.
A Quick Look at the Current State of Play
in Various Countries-Challenges and Opportunities
ur findings show that there are various basic requirements and possible opportuni-
ties associated with innovation and creativity underpinned on initiatives and tactics.
This is practically the role of the Multilateral Development Banks (MDBs).
Recently, the technological progress on the Internet and the high connection
speeds have allowed member states to exchange substantial information with the
participants in various programs and works, promoting knowledge from a distance
in a modern, cost-effective way . However, MDBs are required to work harder in
order to measure their effectiveness in periods when creativity, innovation and
competitiveness are brewing at national and local level .