It could be useful to use the definition of Research and Development (R&D) provided by the Organization for Economic Cooperation and Development (OECD): R&D activities are defined as systematic work to find new knowledge or ideas without the aim of a particular purpose. Systematic work is further defined as the one that uses research results, scientific knowledge or new ideas to bring about new material, goods, services, processes, systems, methods or significant improvements of those that already exist. At the same time a definition of innovation can be used in order to distinguish it from basic R&D studies (Basic research is the kind of research carried out to increase understanding of fundamental principles).
Many times the end results have no direct or immediate commercial benefits: basic research can be thought of as arising out of curiosity. However, in the long term it is the basis for many commercial products and applied research). Innovation is based on results either from new technological development or from new combinations of existing technologies; this means that R&D is an important component of the innovation process. Therefore, innovation can be seen as the following step that follows R&D activities. Companies will use innovation and new knowledge to apply and implement basic researches. In earlier neoclassical theory, knowledge was regarded as an exogenous variable that together with the other company’s components, such as input goods, labor and capital, was affecting productivity. In the past decades, instead, knowledge has been considered no longer as an exogenous variable, but instead as more and more like an endogenous important variable, and an essential factor in order to explain growth and productivity. Considering R&D as an endogenous variable, it is possible to think of innovation as the factor that can grant long-term growth and rising of economics of scale. Therefore, knowledge cannot be considered as something external to the company any longer; it has to be regarded as a fundamental endogenous resource that the company needs in order to operate in the modern environment.
The main aim of this paper is to examine both the importance of Knowledge Management (KM) and R&D activities, within the private and public sector, and to propose an empirical comparison between the situation in the Nordic countries (Sweden and Finland in particular) and in Italy. The paper examines the importance of R&D activities from theoretical and macroeconomics perspectives, highlighting the connection among innovation and welfare of a country and showing the investments flow in innovation through state, academia and then enterprises. Subsequently, it focuses on the Scandinavian countries and their public policies in terms of innovation. The internal and external drivers pushing and stimulating the investments are thoroughly explored with particular attention to the companies’ expenditures. At the end of this section, there is a description of the R&D situation in Italy, showing the boundaries and the problems behind the limited amount of investments done in innovation, especially among the private institutions. As conclusion, a practical case is proposed, dealing with what happened in Kista through an ambitious long-term process based mainly on research and innovation. Kista, from a small municipality close to Stockholm, in a few years had become the second biggest IT cluster in the world, just after the Silicon Valley.
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