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INTRODUCTION ailand has experienced major shis in its socio-economy over the past three decades, moving from an agriculture economy toward a newly agro-industrialised economy in the 1970s and then from a labour-intensive to more knowledge-intensive economy in the 1990s. In addition, there has been a systemic shi within two major economic development concepts, knowledge-based economy (KBE) and creative economy (CE). ere are three knowledge intensive business service (KIBS) sectors within ai creative industry namely; architecture, advertising and soware. In order to capture the whole picture of the innovativeness in these sectors, we applied the Community Innovation Surveys (CIS). e main ndings from the survey illustrate that product innovation are mainly developed in-house in order to reduce cost of production or provision, while the majority of rms consider innovation activities as a high risk and expensive option. Suppliers and competitors play a crucial role as major sources of innovation. In reality, innovative activities take place primarily at the city level, where innovation support services are located, and

where the majority of economic activity takes place. When conceptualizing innovations and innovation systems in a latecoming economy, particularly in ailand, we needed to review the developmental paths of ai KBE and CE, with special reference to KIBS. en we analyzed a sectoral innovation survey on the three KIBS oriented creative sectors. Emergence of a Kno wledge-bas ed Economy (KBE) and Creative Economy (CE) in Thailand In 1996, Thailand introduced its rst information technology policy, in which the National Information Technology Committee (NITC) promoted and drove national IT development. 1

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In 2002, Information Technology Policy: ailand’s Vision towards a Knowledge-Based Society (2001–2010) was introduced to support three key components, which are building knowledgebased human capital, promoting innovation in economic and social systems, and strengthening information infrastructure and industry. ailand entered into a KBE aer the 1997 nancial crisis. e actors in ailand’s National Innovation System have rather weak capabilities and they are not well connected in terms of knowledge linkages (Intarakumnerd, Chairatana, and Tangchitpibul, 2002 and Intarakumnerd and Chairatana, 2008). According to a 1999 survey commissioned by the National Science and Technology Development Agency (NSTDA), a key driving agency for KBE, the total research and development expenditure in ailand was around 0.26 percent of the gross domestic product, which is relatively low when compared to other developing countries. In the World Competitiveness Yearbook, published by the Institute for Management Development, ailand ranked very low in terms of international competitiveness in science and technology. Currently, the ailand National Economic and Social Development Board (NESDB) roughly de nes CE as a using of knowledge, education, creative work 2

and intellectual property use and creations which relate to the traditional cultural foundation, society’s know-how accumulation, technology and innovation in order to accelerate economic growth. ere were two major development initiatives in ai creative industries; ainess and Value Creation (2004 to 2007) and Creative ailand (2008 to present). Pansak Vinyaratn, Prime Minister aksin Shinawatra’s chief policy adviser suggested Thai retail business operators adjust their product offerings, and add value to their products and services through design and innovation. Through the Thailand Creative and Design Center (TCDC), he promoted “ainess” and “Value creation” concepts. TCDC developed the “Value creation economy” concept to accelerate the nation’s engagement in knowledge and creative businesses.

including; an upgrading on infrastructure to promote and support the creative economy system, laying the foundations for creative thinking in the ai education system, encouraging all sectors of society to attach importance to the creative economy, and promoting and supporting creative economy-related businesses In October 2009, the Govern- and industries. ment under Prime Minister Abhisit Vejjajiva established Preliminary Mapping of the National Creative Economy Thailand Knowledge Policy Committee to set guide- -Intensive Business lines for creative economy policy. Service (KIBS) within e committee was formed at a Creative Industries meeting of the National Intellec- For this project we classified tual Property Policy Committee, the ai creative industries by shortly aer the launching of the applying 2 major international “Creative Thailand” project in industry classi cations, the International Standard Industrial August 2009. Classi cation (ISIC) Rev 4.0 and e committee is responsible for the Nomenclature of Economic 12 points in four major areas, Activities (NACE) Rev 1.1. We

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land’s media trends are focused on digital media, especially the internet and mobile media. Cable television has increased to 30% of ai households. Today, the eld of architecture is particularly competitive. In ailand, this industry has been urged to adapt to plans for supporting creative economy by focusing more on innovation. It can be said that ailand’s architecture industry has great potential and most ai architects, especially the younger generation, are more open to both new ideas and design innovations. proposed four classi cations for Thailand’s creative industries within the areas of knowledge intensive service activities (KISA), namely; visual arts, architecture, advertising and soware.

e soware industry is one of the high-growth sectors in ailand. Since 2004 the software industry has enjoyed an annual growth rate of 23% a year and the sector reached a value of 2 billion USD in 2008 (SIPA, 2009). e industry is compromised of more than 600 local companies with 35,000 employees, 45% of those being programmers (Danish Trade Council, 2007). ailand’s soware market is divided into 4 categories: Enterprise Soware, Mobile Application Software, Embedded System Soware, and Other Soware (SIPA, 2009).

However, for KIBS sector, based on the ISIC Rev 4.0, there are seven creative industries including performing arts, lm & video, publishing, broadcasting, architecture, advertising, and software. When applying the NACE Rev 1.1, more than half of the functional creation subset belongs to KIBS including architecture, advertising, and Community Innovation soware. Survey (CIS) Innovation is a critical factor in In ailand, advertising is one of encouraging economic growth of the major industries which has a developing countries and can be market value of 80 to 90 billion derived from both internal and baht per year. It increased steadily external knowledge. Over time at 8% from 2001 to 2007. ai- the service sector has become

more innovative. e Community Innovation Survey (CIS) was developed as a tool to measure innovation. The CIS4 survey focus on product innovations (goods and services), process innovations, organizational innovations, and marketing innovations unlike CIS1 and CIS2 that con ned only technological innovations (South African, 2005). CIS4 was applied to each of the three KIBS related creative industries, architecture, advertising, and soware. e questionnaire was prepared in ai and then translated to English. The results re ect trends for the 2008 through 2009 period. e survey was distributed to 330 rms, broken down as follows; architecture 100 rms, advertising 100 rms, and soware 130 rms. e Department of Business Development, Ministry of Commerce provided its database for the architecture and advertising industries. e Soware Industry Promotion Agency (SIPA) provided information on the soware industry. A total of 130 executives (39.4%) responded, 47% from architecture, 33% advertising and 20% software. There are 9 dimensions of analysis; characteristic of respondents, characteristic of enterprise, type of innovation, timing, effects of innovation, innovation activity and expenditure, source of innovation and cooperation of innovation activities, the hamper of innovation, 3

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and intellectual property rights.

across the board.

Characteristic of Respondents

In terms of customers, we found that 87% to 90% of enterprises served private sector customers, while the remaining customers where from the public sector.

According to the survey, the majority of the respondents, 55%, were male. e average age range of all respondents was between 26 and 35 years old. 65% of the respondents earned their Masters Type of innovation degrees and 38% had 11 to 20 The advertising and software industries, introduced more new years working experiences. goods (52% and 40%) to the marCharacteristics of ket than new services (46% and enterprises 30%). However, the architecture e majority of the respondents industry introduced slightly from the architecture industry more services (43%) rather than were from construction manage- goods (40%). ment companies (14%) and construction contracts rms (8%). In terms of product innovation For the advertising industry, the development, the survey inditop two raking categories were cated that all three industries production houses (9%) and focused a great deal in-house, advertising agencies (9%). e 42% in advertising firms and majority of respondents from the 46% in both architecture and so ware industry were mainly soware rms. e architecture represented by mobile applica- and soware industries coopertion companies and enterprise ated in development with other so ware rms, each with 12%. entities approximately 44% of the Approximately 84% of enter- time, while the advertising indusprises are situated in Bangkok try did so 55% of the time. Less and its outskirts, compared with than 10% of product innovation 15% to 17% of enterprises in development was utilized from suburban areas. other enterprises or institutions, with no cooperation from the For businesses in operation one originating rms, in each of the to three years, architecture came industries. in at 23%, advertising at 18% and soware at 32%. For businesses Timing in operation four to six years, Most product innovations were advertising had the highest rate at launched after a competitor’s almost 70%, 66% for architecture, launch. Over 72% of software and 58% for so ware. e results rms launched products aer a for businesses in operation seven competitor did. Advertising had years or greater were 10% to 12% 67% post competitor launches


and architecture had 62%. Businesses that wait to see their competitor’s product may have an easier time imitating and developing their own products, leading to only incremental changes. Effects of innovation

Effects of innovation can be broken down into four components; new markets penetration or increased market share, quality improvement of goods or services, increased capacity of production or service provision, and cost reduction of production or provision. According to the research, the greatest effect of innovation is cost reduction of production, where as other effects are rather weak. As its result, many businesses focus on cost reduction in order to build their competitive advantage. In our point of view, businesses should be concerned with other effects which impact their rms. Innovations can provide an opportunity to enhance market share, as well as in uence the growth of new product development. Innovation activity and expenditure

is survey divided innovation activities into four types: in house R&D, acquisition innovation, acquisition IP, and in house training. KIBS recognizes employees as a rm’s most valuable asset. is is demonstrated by all three sectors ranking in-house train-

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ing as 90% of the source of innovation. Source of innovation and cooperation of innovation activity e survey results showed that little innovation came from government agencies or customers, in each of the three sectors. is contrasts with the business environment of today which focuses on customer service. On the other hand, a relatively large proportion of industry reports that a competitor is a signi cant source of innovation. As previously stated, each industry tended to introduce an innovation aer its competitor. The hamper of innovation

The hampering of innovation factors are identi ed as ve types: economic risk, high cost of innovation, capital adequacy, lack of quali ed personal and uncertain demand for innovative goods or services. The research showed that all industries appear to be most hampered in their innovation activities by the high cost of innovation; architecture 68%, advertising 72%, and soware 70%. On the other hand, all industries considered capital adequacy as the least important hampering factor; architecture 10%, advertising 9%, and soware 8%. We found that money is not a hampering factor in all rms since they have no problem with capital adequacy.

Intellectual Property Rights

We divided the methods of protection for intellectual property rights into 4 categories; patents, copyrights, trademarks, and trade secrets. Both the architecture and soware industries prefer a registered trademark to protect their intellectual property rights, while the advertising industry prefers a copyright. From this research we can conclude that most industries recognize the registration of intellectual property as a key factor in maintaining competitiveness. Conclusion Creative economy becomes another popular economic development concept in the world’s economy. ailand has recently determined to strengthen its knowledge-based economy (KBE) through promotion of creative industries, which regards creativity, knowledge and access to information as engines of economic growth and development in a globalizing world. is study investigated innovativeness of KIBS in ai creative industries by selecting 3 subsectors; architecture, advertising, and soware. e Community Innovation Survey 4 was used for data collection from selected enterprises. All of these industries are based on the service sector which has noticeably become more innovative. e main nding was that the advertising and software in-

dustries are introducing more product innovations, in the form of goods, than the architecture industry. Furthermore, the greatest effect of innovation for all three industries relates to the cost reduction of production or provision. However, businesses need to recognize other effects in order to build their competitive advantage. From the survey, all industries appear to be most hampered in their innovation activities by the high cost of innovation and other internal innovation activities. However, capital is not a hampering factor in any of the sectors. Each of the three industries recognizes the need for protection of intellectual property as a factor in their competitiveness.

CONTACT INFORMATION Pun-Arj Chairatana (PhD) Noviscape Consulting Group Co., Ltd. 163 Ocean Insurance Building, 12th Fl., Unit 12 F-G, Surawongse Rd., Suriyawongse, Bangkok, Thailand, 10500 +66-2-237-9570 +66-2-237-9569 (Fax)

With support from

Knowledge-Intensive Business Service Within Creative Industry in Thailand