Download Innovation and Development

Innovation Systems in
Latecomer Development
Banji Oyelaran-Oyeyinka
Professorial Fellow, United Nations
University-Merit, Director, UNHABITAT
Emerging Economy Perspectives and
Priorities in a Multi-Polar World
November 2011
CONTENT
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What is Development in the context of
Innovation studies?
How do we view development in light of
Innovation and Learning Studies
What have we learnt in this Dialogue and
the extant Framework?
On the Role of Policy and Institutions for
Innovation
Thoughts on Future
How Has Development been
interpreted?
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What are key issues emerging from the more
than five decades of learning, theorizing and
experimentation?
They are complex issues that can be classified
into a number of stylized facts.
How do we understand lessons from the
Dialogues?
Three stylized categories:
1.
Underdevelopment has a single cause
These “causes’ have evolved over time and
include the following:
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Shortage of physical and financial capital. The
debate conceptualized economic development as
a process requiring complex shifting of factors of
production from low-productivity, traditional
sectors plagued with diminishing returns to the
more productive industrial sector characterized
by increasing returns.
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The high end is an economy with high levels of
human capital and knowledge with an economy
corresponding to “increasing returns to scale”
and corresponding path is a high-factorproductivity, high growth and high levels of per
capital income.
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Ineffective government:
Recently “governments matter” (Chang, 2001;
Stiglitz, 2001) and that “the role of the state must
be at center stage” (Stein, 2001)
What we Know from Development
and Innovation Studies
The issues pivotal to the “new” development framework are:
1. Development is a non-linear, non-sequential and
complex process; Innovation is a non-linear, nonsequential and complex process
Example: East Asian firms reversed the sequence of innovation cycle
2. Development paths are differentiated and nonunique; Innovation trajectory is equally
differentiated.
Examples: Foreign owned; Taiwan small firms, locally-owned; Malaysia.
Large MNCs, foreign-owned; China: a new set of institutions and
organizational forms. India complex sectorally-diverse modes (BPO
success)
3. Development is path dependent; Innovation is
path dependent.
Both shaped by initial conditions which affect
subsequent paths of the process.
Examples: China’s dominance of computer hardware not a sudden
success; India’s success in software rooted in long years of
building engineering and science human capital
4. Development paths are not fixed; Innovation paths
are not set in unalterable contours
Both are subject to change through policy and
institutional changes.
5. Development process is shaped by the state;
Innovation is shaped by state action.
What is “New” in the New
Development Framework?
The new makes a decisive shift in focus and content of
the factors explaining economic growth.
1. That development is not only about capital
accumulation neither is it just about more human
capital, important as these elements are.
2
Eliminating “big” government and simply
correcting for price distortions resulting from state
action has equally not solved the problem of
development.
3.
Development is a long process of
organizational change that takes as starting
point five fundamentals, namely, financing,
technology, institutions, human capital and
policies.
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The role of institutions are critical, that
“history matters”, and that wealth
distribution is a spur to sustained
economic growth.
5.
Distributional inequalities perpetuate individual and
productive structures from one generation to
another. For instance an economy stuck in a low
equilibrium production system will only be capable
of supporting an incentive, contract and outcomes
reflective of the kind of economic system.
STI: What Differentiates
Countries
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Pattern of R&D and Wealth Creation: R&D
spending is highly correlated with the wealth
of nations; the highest spending is found
within the OECD countries although a number
of Asian countries are beginning to spend
substantial amounts on R&D;
STI: What Differentiates
Countries
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Pattern of Sectoral Specialization: Countries
specializing in so called high-tech goods and
services tend to invest proportionally heavily
in R&D activities.
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Pattern Public-Private of R&D Spending:
Private firms in high income countries are the
dominant R&D players
What separates Countries
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Pattern of Basic Research Investment:
Spending on basic research is also
concentrated in high income countries with the
sort of incentive structure and institutions that
promote advance scientific knowledge;
Differential Investment in Skills Acquisition:
There is a significant difference in the quality
of skills and knowledge of scientists between
developing and developed countries.
What separates Countries
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Identify Key Drivers of Innovation Success:
Innovation capacity building effort in
latecomer countries must seek context-specific
Policies and Institutional solutions.
How will Institutions and Policies
solve the Development Problem?
In addition to what we do we need to include:
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How technology, Institutions and Innovation
increase living standards and do we reflect
these in standards of health and literacy.
The goal will be to eliminate poverty and
inequalities as has been done at least in part by
most industrial societies.
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We need explicit formulation to include
sustainable environment and all inclusive
societal transformation.
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We have pointed out differences in Systems of
Innovation, Now we need to explain them and
finds way to articulate different systems in
emerging economies.
We need to help build Policy and Institutional
Capacity to build Innovation Capacity
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What innovation is
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Much of Innovation in a developing context includes
continuous improvement in product design and
quality.
Changes in organization and management routines,
creativity in marketing and modifications to
production processes that bring costs down.
Increase efficiency and environmental sustainability.
The ability to manage a portfolio of partnerships, to
form linkages and to learn through them.
Innovation Policy
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The focus of Innovation Policy is on the
interaction between system actors and their
embeddedness in an institutional and policy
context that influences their innovative
behaviour and performance.
Coordinating these different actors e.g.
agencies of government is difficult, complex
and undermined by vested interests.
Innovation missing Links
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The innovation system approach considers the demand-side.
Demand flows amongst others signal the shape and focus of
research, and the decision as to which technologies from
among the range of the possible will be developed and the
speed of diffusion.
Demand is not articulated at arms length through the market,
but may take place through a variety of non-market mediated
collaborative relationships between individual users and
producers of innovation (Lundvall: 1988, 35).
In broader systems terms demand may be intermediated by
policies.
Conventional S&T policy in poor countries has only come to
terms with this reality.
Innovation Policy
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Government Innovation policy in industrial countries
usually result in actions in three broad dimensions:
Supply conditions which involve the provision of
financial and human capital,
Macroeconomic conditions which include competition,
taxation and legal framework to allow for innovation
activities to thrive;
Demand conditions which include procurement and
purchases by central and local governments.
Elements of IP
Supply Side: (a) Support for knowledge infrastructure
particularly R&D in public and private domains,
 promote research and professional associations, use of
competitive research grants;
(b) general and technical education, support university
research, apprenticeship programmes.
(c) Information networks, library and database services.
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Elements of IP…..
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(i)
(ii)
(iii)
Macroeconomic Conditions:
Loans, subsidies to private provision of
innovation, financial services, export credits;
(ii) taxation: company, personal, indirect and
payroll taxation and tax allowances;
Legal and Regulatory measures: patents,
health and environmental regulations,
monopoly regulations and competition
policy.
Elements of IP….
Demand Conditions: (i) Procurement policy:
central and municipal government purchases
and contracts, R&D contracts, purchases;
(ii) Commercial instruments: trade agreements,
tariffs, currency regulation.
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THOUGHTS ON STIPS
INNOVATION
 POINTS FOR
DISCUSSION
DEVELOPMENT
 POINTS FOR
DISCUSSION
END