Download סקטור ה- "היי טק" וצמיחת המשק

Government Support for
Commercial Innovation
Knowledge Economy Forum V
Prague, 28 March 2006
Manuel Trajtenberg
Tel Aviv University, NBER, CEPR
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Introduction
R&D Policies: Prospects and Perils
We take it for granted that Governments should
support Innovation and R&D, ride the wave of
the Knowledge Economy.
• “Official blessing” of such view in the Lisbon
agenda: goal of 3% R&D/GDP
• “Bandwagon effect” in the globalization of
R&D;
• Rush to mimic policies of presumed success
stories (e.g. Finland, Israel, etc.),
• Rush to attract/set-up Venture Capital funds, etc.
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Intro - continued
In order to “do it right”, need to understand the
fundamentals:
• What is exactly the economic rationale for
government intervention in the realm of Innovation
and R&D? =>
Appropriate policies should be derived from it!
• How that varies across countries, given the
tremendous heterogeneity in their institutions,
stages of development, availability of appropriate
inputs, etc.?
Not such as a thing as “one size fits all”!
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Economic Growth and Innovation
The historical evidence:
Sustained growth always means widespread
innovation throughout the economy, not “more
of the same”.
Innovation takes many forms:
• New/improved products and processes (“new”
for the country/sector/firm);
• Some “informal” (ingenuity at plant floor), some
formal, i.e. patented innovations from R&D labs.
• Institutional, organizational innovations.
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Growth and Innovation – cont. 1
Innovation entails a variety of processes:
• Far reaching reallocation of resources (hence lots
of entry and exit),
• Upgrading the composition of skills and capital;
climbing-up the tech ladder;
• Changes in patters of trade.
E.g. see UK, US in 19th century; lately S. Korea,
China, India, Ireland, Israel, etc.
=>
In every country
continuous innovation  sustained growth!
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Growth and Innovation – cont. 2
•
Historically, the cumulative effect of widely
distributed “small” improvements as significant for
growth as the impact of “major” innovations.
• Innovations entail interdependencies, necessitating
complementary investments and innovations to reap
their full benefits.
• Relevant “types” of innovation varies with stages of
development, institutional setting, etc.
=>
Growth-enhancing Innovation policies:
not only supporting formal R&D, strengthening IPR,
not only in the “high tech” sectors.
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The Economic Rationale for Government
Support of Innovation and R&D
R&D
K
TFP
Growth
Endogenous growth theory: economic
forces shaping R&D hence TFP
Arrow (1962): Social returns >> private
•
•
•
Spillovers: Partial appropriability
Information asymmetries: funding gap
High risk, lumpiness, coordination
failures
Solow (1956): Total Factor Productivity
(TFP) key to growth
Too little innovation => need Government
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intervention (e.g. subsidize R&D)
The Rationale for Government Support
continued
So, clear-cut case for Government intervention to
support innovation, i.e.
• Even in a well-functioning market economy,
there typically will be underinvestment in
Innovation and R&D => Government support
• However, many economies not “there” yet, need
Government action to create institutional
framework conducive to innovation.
• Sequencing is important!
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Spillovers: the basics
1. Innovations generate positive externalities (e.g. new
ideas, new K) that benefit other would-be inventors;
2. Innovations confer benefits to purchasers of new
products (consumers and producers) that often
exceed sustainable increases in price;
=>
social returns from innovations >> private returns
Spillovers channels:
• local interactions, information diffusion, mobility,
• International trade, FDI
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Broadening the Scope of Spillovers,
hence of policy
• A single innovator may break the mold of stagnant,
concentrated markets, and trigger a process of
“spiraling innovations” – hence extra benefits.
• “Demonstration effects” in diffusion: Early adopters
positively impact later adopters: network
externalities, informational effects, emulation, etc.
Policy implications:
encourage first-time innovators in stagnant markets;
support early adopters, particularly of technologies
that enhance productivity in wide range of sectors.
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More on spillovers and “demonstration effects”:
rent-creation vs. rent-seeking norms
• J. Mokyr - precondition for Industrial Revolution (thus
for growth): shift from rent-seeking to rent-creation,
encouraged by the Enlightenment.
• Shift yet to occur in some emerging economies: is it
more attractive for entrepreneurs to search for
innovative ways to further extract rents, or to develop
new technologies?
Policy implications:
change cost-benefit of rent-seeking versus rent-creation,
help market pioneers; need the local “Thomas
Edison”, the local “Steven Jobs” to emulate. 11
Who really benefits from spillover flows in
the global economy?
• In very large economies such as the USA, spillovers
benefit mainly the local economy:
- Large: high Prob. that other local agents will benefit;
- Relatively low [Ex+Im]/GDP: small risk of spillovers
slipping out.
• In “small” open economies (like ECA countries) :
- Fewer potential local recipients;
- Spillovers may easily spill out, benefiting foreign
firms and consumers rather than local economy;
- But may be recipient of trade-mediated spillovers
=> need “absorptive capacity”
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Local vs. Global Spillovers
some policy implications
• Just promoting local innovation may not result in faster
economy-wide growth.
• Israel as case in point: extremely successful innovative
ICT sector, but slow growth in rest of the economy.
Hence innovation policies should aim at increasing
R&D in a way that,
• incentivizes spillovers inflows rather than outflows;
• develops “absorptive capacity”;
None of it can be taken for granted, certainly not in
emerging countries.
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Innovation and Growth in the context of
“General Purpose Technologies” (GPTs)
GPTs as “engines of growth”, e.g. the steam
engine, electricity, ICTs:
• GPTs drive growth by spreading over a wide
range of sectors, prompting them to innovate as
well (i.e. “innovational complementarities”).
• Progress in the adopting sectors feeds back into
the GPT sector => further advances in the GPT
itself, feeding a positive, self-sustained loop.
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GPTs continued
• Growth in the US, 1995-2000, due not just to “High
Tech,” but to WalMart! TFP growth in retailing via
massive adoption of ICT-based methods.
• The GPT sector: small, cannot pull on its own the
whole economy: if the rest of the economy fails to
adopt the GPT, or to make complementary
innovations, growth will not materialize.
Policy: focus not just on the prevailing GPT (such as
ICT now), but on the potential “Walmarts”…
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Guiding principles for growth
enhancing innovation policies
1. Innovation should be widely distributed across
sectors, and types of innovations.
2. Bottom up policies, not top down: provide enabling
conditions and incentives => innovation should
spring from widening cohorts of would-be
entrepreneurs, not from gov labs or bureaucrats...
3. Alter the payoffs between innovations aim at rent
creation versus ingenuity in rent extraction.
4. Main policy levers:
skills, incentives, information, finance
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Policy levers: (i) Supply Skills
Wide spectrum of skills needed for innovationbased growth strategy, acquired via formal
education, training, learning by doing.
Two-pronged strategy:
• Supply broad-based, up-to-date skills, including
math, ICT, English, management; upgrade often.
• Ensure responsiveness (endogeneity) of academic
institutions supplying vocational and advanced
skills (Rosenberg: “Universities as Endogenous Institutions”).
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Policy levers: (ii) Incentives
Crucial attractor: Expectation of large rewards to
innovation, given risks, costs.
• Traditional factor: appropriability, IPR.
• Would-be innovators should have a stake in the firm,
prospects of promotion, outward mobility.
• Low “barriers to innovation” within markets
(officially sanctioned regulations, tacit collusion)
Policies promoting,
inclusion (of potential innovators),
openness (of markets).
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Policy levers:
(iii) Access to Information
•
Necessary condition for innovation: access to
K, info about technology, about markets
(substitutes, market size, prices).
• Innovation as “recombination of ideas”, hence
wide knowledge base.
• Policy:
– Internet access, computer and search skills
– Openness and competition in media,
– Encourage knowledge intermediaries,
– Transparency in businesses.
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Policy levers:
(iv) Availability of Finance for Innovation
• Generalized problem, given information
asymmetries, lack of collateral, lack of screening
expertise; more acute in emerging economies!
• Need “angel investors”, internal finance, VCs, etc.
Not much available.
=>
• Preeminent government role: provide funding for
innovation, many channels possible, e.g. matching
grants, conditional loans, etc.
• Lots of international experience – tap it!
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Further policy issues
for ECA countries
• Legacy in many ECA countries: associate
innovation with centralized research institutions,
disconnected from market forces.
• Need to metamorphose them into commercial
R&D labs – not easy!
• Think foremost of incentives to innovate, of
demand stemming from open markets, and not
just of supply of researchers…
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But, is Innovation Policy a viable
option for ECA economies, really?
• Any country can do it, regardless of size,
location, and stage of development, but
policies should reflect all that.
• Each and all countries should do it in order
to embark in long term growth,
• There is no alternative but to do it!
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