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competitiveness

Profitable research

Anpei puts together company representatives to debate technologicalinnovation, and to analyze ways of encouraging investments in researchand development

The rapid process of industrialization, on the basis of the imports substitution, above all in the 30’s and 70’s, prevented the country from having any critical problems of access to technology. It did, however, jeopardize the ability of some sectors to innovate, in particular as far as processes and products were concerned. This distortion is today, in the eyes of the Ministry of Science and Technology, an obstacle to competitiveness, and overcoming it is a challenge that calls for actions, not only from the State and the development agencies, but also from business. The definition of strategies to act as a fulcrum for technological innovation in companies is therefore fundamental. This was the theme of the 1st Conference of the National Association of R, D e E of Innovating Companies (Anpei), in São José dos Campos, between June 21st and 22nd. “We need to turn the tables.” summed up Anpei’s executive director, Miguel Chaddad.

South Korea, which used to face similar problems, managed to “turn the tables” thanks to public policies of incentives for investments in research and development (ReD). Song Hyun, who represents the Korea Industrial Technology Association (Kita), told the members of Anpei that the Korean government made use of corporate facilities and tax benefits to encourage innovation. “It took ten years for us to achieve a level of industrialization that the developed countries took 25 years to reach.” he said.

At the moment, Korean companies are responsible for 90% of the investments in ReD in the country, a figure that is similar to the one recorded in the United States. “In Brazil, private sector investments do not go beyond 20%.” compared the minister of Science and Technology, Ronaldo Sardenberg, who was present at the conference. Here in Brazil, the State is now starting to create incentives for investing in innovation. An example of this are the Sectorial Funds for Scientific and Technological Development, which will be financing research and projects for the implementation of new technologies in the sectors of oil, energy, water supplies, and telecommunications, among others.

The federal government also intends to strengthen Law n° 8661, of 1993, which provides for the granting of tax benefits for investments in ReD. It is also studying the creation of a simplified tax regime, to attract cash from the pension funds to research. “Companies need to invest in technology and to increase the technological content of their products, so as not to be excluded from the market and also to conquer the international market”, was the minister’s advice.

Investing for results
Besides ensuring competitiveness, innovation alsobrings a profit. “Investments in technology have a return”, guaranteed Antonio da Cunha Campello, manager of Organizations and Processes with Embraer, another speaker invited by Anpei. The company’s sales leapt from US$ 360 million in 1996 to US$ 2.8 billion in 2000, a period in which it betted heavily on ReD. The development cycle of its products, for example, was reduced from five to three years, and the time to make an airplane, which used to take 12 months, was cut by half. Productivity grew: the sales per employee ratio rose from US$ 40,000 in 1994 to US$ 307,000 last year. “This shows the company’s ability to generate results and to be competitive globally.” said Campello.

The process of innovation that ensured the opening up of the international market nowadays reflects even on the structuring of business. This is the case of the project for the development of the ERJ 170-190, an aircraft with the capacity to carry 108 passengers, with a cost estimate of US$ 850 million. For example, the new strategy for organization relies on partnerships between Embraer and its suppliers, and techniques of simultaneous engineering.Over recent years, the company has expanded considerably its pool of knowledge. Some 10% of its 11,000 employees are engineers, and part of these have done a specialized course at Embraer University. Through an agreement in the amount of US$ 60 million with FAPESP, the company has agreements with several universities, and is defining new projects.

Brazilian multinational
Another example of the good results reaped from investments in technology, shown at the Anpei conference, was Embraco, a manufacturer of compressors for refrigeration, with business units in the United States, Italy, China, and an office in Singapore. The company has a 70% share of the domestic market, 25% of the international market of the international market for compressors, and 94 patents. It invests some US$ 20 million a year in ReD. “We have been investing the same percentage of our sales in research since the 70’s, even in periods of reduced activity”, explains Ernesto Heinzelmann, Embraco’s superintendent, who has already occupied the position of director of technology with the company.Embraco started its activities in 1974, in Santa Catarina, using technology purchased from the Danish company, Danfoss. “They were good teachers, and we were good pupils”, said Heinzelmann. In 1983, they created an area for ReD, and were already producing compressors with 100% Embraco technology in 1984. “We were pioneers in the development of alternative gases to CFC in the 90’s”, he recalls.

In a consolidated and highly regulated market, the company’s interest is focused on applied research. To do so, besides 23 laboratories in three countries – Brazil, Italy and China – Embraco also maintains others in the Federal University of Federal de Santa Catarina (UFSC). The company has agreements too with the University of São Paulo (USP), the State University of Campinas (Unicamp) and two universities abroad, Purdue, in the United States, and Glasgow, in Scotland. To avoid losing the research staff and to keep them busy in technological activities, the structure for the company’s technical career has been running side by side to the administrative structure since 1987. A senior researcher, for example, has the same status, salary and benefits as managers who occupy the same level in the company’s organization.

For Heinzelmann, a good option for boosting innovation would be to encourage suppliers to keep pace with the companies’ technological development. “We have to transfer competitiveness to our suppliers.” he said. He also suggests that companies should invest more heavily in their relations with universities. “There is no cheaper place to carry out university research than in Brazil: the professors do not earn much, the laboratories are badly served, and anything extra is welcome.” he concluded. Embraer’s Campello thinks that Anpei, together with the federal government, should draw up measures to encourage the ten largest Brazilian companies to place bets on the country’s technological future.

There are already successful options to support modernization of companies. Examples of this are the Program of Partnership for Technological Innovation (PITE) and the Small Business Innovation Research (PIPE), both financed by FAPESP, which are now working with 162 and 55 companies, respectively. “We do not interfere with the development of research, but the partnership has to generate knowledge.” says José Fernando Perez, FAPESP’s scientific director.

Small company
If there is little encouragement among the big corporations for investments in ReD, the problem is even more serious among the small and medium companies, says Júlio Sérgio de Maya Pedrosa Moreira, the presiding director of the Brazilian Support Service to Small Business (Sebrae). In partnership with the Financier of Studies and Projects (Finep), Sebrae launched the Program of Technological Support for Mini and Small Companies (Patme), which will be developed with the backing of universities and research institutes and a budget of R$ 80 million.

Patme is still far from having the same dimensions as Anvar, the French innovation agency, which enjoys an annual budget of US$ 200 million, to finance projects of companies that have up to 2,000 employees. At least 74% have an average of 50 employees.” Anvar’s representative, Sylvie Leaute, told Anpei’s members. Last year, a total of 3,000 projects were submitted to Anvar, and 1,317 of these were put into practice. The funding includes the payment of half the salary of the researchers taken on by the company in the course of the first year of the program.

Multinationals invest in customizing products

In the great majority of multinational companies, their ReD centers are set up in their country of origin. In Brazil and in the other regions where they operate, these companies maintain centers for the application and customization of products, in order to adapt them to the local cultural patterns and the legislation. In the case of Johnson&Johnson, for example, the research center is in New Jersey, in the United States, and is split into areas by product.

“When a company is global, its leadership does not lie with its country.” explained Susan Nettesheim, Johnson&Johnson’s vice-president for ReD, who took part in the Anpei meeting. “The greater part of the products is developed in a country and then launched all over the world.”

The regulations are also a strong stimulus for research, above all in the Latin American countries, she concedes. “The best insights come from the small countries, because they are closer to the market.” The various teams get together four times a year, “for future studies.” In the course of the year, information on the projects is exchanged using websites.

Renault is also investing in applied research, to adapt its automobiles to Brazilian environmental legislation and consumer patterns. The ReD projects are developed, in hierarchical order, in what the company classifies as Center of Competence, and Remote Offices for Coordination and Management. “In Brazil, Renault runs a Remote Office for Coordination and Management.” explained Kim Lansford, the manager of Renault’s International Research Group.

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