Dr Gabriela Dutrénit

Science, Technology, Engineering, and Innovation as Tools for Prosperity within the Preparatory Framework of the Second Meeting

of Ministers and High Authorities on Science and Technology

Session III - Science, Technology, Engineering, and Innovation as tools for Increasing Competitiveness

Dr Gabriela DutrénitDr Gabriela Dutrénit

July 2008July 2008

Globelics

The STI policy from the Innovation System approach The Latin-American NSI Some successful cases Basis for a STI policy Recommendations for fostering innovation and firms’

competitiveness

AgendaAgenda

The STI policy from the Innovation System approach

Orthodox theory of ST policy Systemic-Evolutionary perspective of STI policy

Technology as information •Looks at technology as combinations of tacit and codified knowledge

Lineal approach, largely static •Assumes that knowledge generation and absorption are non-linear and dynamic processes

•Capabilities already built, cumulative learning and time matter.

Lineal model of STI (S→D or D →S) Interactive model of STI, networks of knowledge supply and demand, co-evolution

Links between agents only through the market

Institutions mediate between agents

Focus on market and government failures related to uncertainty, low aproppiability , etc.

Focus on the solution of systemic failures, in addition to market and government failures

National policies and centralized intervention

Regional level and governance are increasingly important

Different rationalities of the STI policy

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Identify national specificity, weaknesses and strength of the NIS to design ad hoc efficient policies of STI.

Design of a set of policies coordinated by different government levels (local, regional, national). It is needed to combine top-down and bottom-up policies.

Design of long-term policies based on consensus, association and commitment by all key actors to generate accumulative effects.

Promote tie relationships between the scientific community and other NIS agents to apply knowledge to national needs.

Support initiatives for clusters development, which governance forms are largely bottom-up.

Stress the government functions of channeling and catalyzing changes in agents behavior; stress on promoting colective actions and learning processes.

Look at an equilibrium between investment in the development of national technological capabilities in sectors such as :

•High and medium knowledge intensity•Those that use local knowledge and are based on local systems

The STI policy from the NSI perspective

The Latin-American NSIs

•Low rate of growth (some countries increased their performance in recent years)

•Export specialization in medium and high tech industries but with low in-house R&D activities

•High inequality and poverty

Key economic and social problems

•Scarce financial resources and allocation problems, the financial Scarce financial resources and allocation problems, the financial commitment of the governments is poorcommitment of the governments is poor (low GERD)•Scientific communityScientific community

•Small Small (#researchers per 10,000 workers)•With levels of excellence in some scientific fieldsWith levels of excellence in some scientific fields•With experience in the solution of specific problems: health, With experience in the solution of specific problems: health, environment and foodenvironment and food•Centered on curiosity-guided research, and with limited incentives for Centered on curiosity-guided research, and with limited incentives for developing problem-oriented researchdeveloping problem-oriented research

•Public sector is the main funding source (% of the GERD) •High geographical and institutional concentration of capabilities•Low R+D and innovation expenditure by firms (small BERD)•Limited innovation cultureLimited innovation culture•Scarce linkages between agentsScarce linkages between agents

We have emergent NIS with weak and disarticulated domestic S&T and Innovation capabilities

The failures of the NISs

Market failures•Capital market: Limited availability of capital for funding innovation•Market of human resources in S&T : Lack of the critical mass researchers, innovative entrepreneurs, decision makers)•High comparative profitability of products and services based on short term strategies and not on innovation activities

Systemic failures•Distortions in resource allocation for different agents•Scarcity and dispersion of resources for STI •Lack of interactive view of the STI system •Networking or cooperation failures •Failures in the operation of the linkages

AL ha seguido marcos analíticos pensados para países con SNIs más consolidados

•Se han seguido los planteamientos sobre política de innovación de la OCDE, BID, Unión Europea, y la experiencia de países exitosos. Marco analítico elaborado a partir de economías que tienen las masas críticas de capacidades de C&T y de innovación.

•No se ha buscado crear las masas críticas necesarias para generar No se ha buscado crear las masas críticas necesarias para generar procesos de endogeneización de la innovación. procesos de endogeneización de la innovación.

•Lentos cambios en el marco institucional relativo al sistema público Lentos cambios en el marco institucional relativo al sistema público de investigación y baja inversión pública en CTI, lo cual ha influenciado de investigación y baja inversión pública en CTI, lo cual ha influenciado negativamente la implementación de los instrumentos diseñados. negativamente la implementación de los instrumentos diseñados.

•Ha persistido un enfoque de oferta con instrumentos focalizados Ha persistido un enfoque de oferta con instrumentos focalizados hacia la transferencia a las empresas de recursos y capacidades hacia la transferencia a las empresas de recursos y capacidades necesarias para la innovación desde el gobierno u otros agentes necesarias para la innovación desde el gobierno u otros agentes relacionados, más que cambiar el comportamiento de las empresas y relacionados, más que cambiar el comportamiento de las empresas y estimular la demanda. estimular la demanda.

•En general el diseño de las políticas no ha buscado explícitamente la En general el diseño de las políticas no ha buscado explícitamente la articulación y la secuenciación entre los diversos instrumentos.articulación y la secuenciación entre los diversos instrumentos.

Sobre los instrumentos para fomentar las actividades de I+D y de innovación del sector productivo y empresarial

• La mayoría de los instrumentos atienden a las últimas etapas de la La mayoría de los instrumentos atienden a las últimas etapas de la I+D (solo los Estímulos Fiscales a la I+D están dirigidos al desarrollo de I+D (solo los Estímulos Fiscales a la I+D están dirigidos al desarrollo de tecnología). tecnología).

• Los instrumentos fomentan en general a las empresas que ya tienen Los instrumentos fomentan en general a las empresas que ya tienen alguna capacidad de I+D o de innovación, pero hay pocos instrumentos alguna capacidad de I+D o de innovación, pero hay pocos instrumentos específicos para aumentar la base de empresas innovadoras.específicos para aumentar la base de empresas innovadoras.

• Sesgo hacia la creación de “nuevos” productos y/o procesos, en Sesgo hacia la creación de “nuevos” productos y/o procesos, en detrimento de instrumentos diseñados para apoyar el proceso cotidiano detrimento de instrumentos diseñados para apoyar el proceso cotidiano de innovación incremental basado en procesos de aprendizaje, de innovación incremental basado en procesos de aprendizaje, transferencia, asimilación, adaptación y mejora de tecnologías existentes. transferencia, asimilación, adaptación y mejora de tecnologías existentes.

•Pocos instrumentos para estimular la demanda de productos Pocos instrumentos para estimular la demanda de productos innovadores. innovadores.

Some successful cases

Chile: Salmon clusterThe salmon and trout culture project in Chile may in itself be considered an innovative endeavour, since it is an introduced species with a high degree of production complexity. However, there has been an accelerated collective learning process in less than 15 years, creating an industry that is currently the world’s main producer of cultured salmon.

The current significance of the salmon cluster for the national and regional economy can be highlighted through the development of its exports. Exports totaled barely over $ 150 million FOB in 1991. By the year 2005, that figure had jumped to over US$ 1.7 billion FOB, increasing by 20% compared to 2004. Salmon exports currently represent more than half of Chilean fisheries exports and just over 4% of total Chilean exports. This positive growth has fostered the parallel development of a series of production activities and sectors in two Region, linked to the direct or indirect requirements of the salmon culture industry. Thus a cluster has taken shape around this activity, which has fostered economic activity and employment in the region.

The collective learning in the salmon production system has largely been manifested through the exploitation of the comparative advantages of the Southern regions of Chile for the farming of this species (climate, geography and water quality), and maximising those advantages through a permanent process of searching for and adapting external technologies, generating local technologies, permanent investment in human capital and infrastructure, and supporting the spaces for the creation of supply companies for practically the whole production chain, most of them being SMEs.

There are currently around 300 companies making up the Salmon cluster. the lack of R+D programs and technology transfer in areas of common interest for the industry led to the creation in 2005 of the Integrated Territorial Program by CORFO targeted at strengthening the Salmon cluster in Southern Chile. This program aims to co-ordinate and target research efforts of public and pre-competitive interest and in the critical points affecting the salmon production chain, in order to maintain and increase the competitiveness of the industry, through specific technological programs.

The salmon industry in Chile is the result of a long-term convergent and planned endeavor that included international co-operation, the creation of local skills, the study of conditions and technology transfer targeted at the development of a cluster, which today is highly successful. It is an example of a long-term concerted initiative, employing all of the capabilities of the State to create a new industry, which is a leader in the global salmon market.

Fuente: BACKGROUND REPORT TO THE OECD COUNTRY REVIEW OF CHILEAN INNOVATION POLICY

Chile: Impuesto al cobre

•Aprobado por el Congreso en mayo del 2005 y en operación desde enero del 2006.

•Financia el Fondo Nacional de Innovación para la Competitividad (FIC), cuyo principal objetivo es promover el desarrollo de la ciencia y la tecnología, la formación de recursos humanos y el fortalecimiento de las capacidades regionales.

•El principal propósito que inspiró esta nueva ley fue obtener una compensación de las empresas mineras cuya actividad se basa en la explotación de recursos naturales no renovables.

Brasil: promoción de sistemas locales (SEBRAE, BNDES)

Actuaciones de SEBRAE para promover Agrupamientos Productivos Locales (APL):

•Promover la cultura de cooperación y el aprendizaje colectivo entre empresas e Promover la cultura de cooperación y el aprendizaje colectivo entre empresas e institucionesinstituciones•Fomentar los procesos de generación, adquisición y difusión del conocimientoFomentar los procesos de generación, adquisición y difusión del conocimiento•Estimular la construcción y el fortalecimiento gubernamental localEstimular la construcción y el fortalecimiento gubernamental local•Promover la construcción y fortalecimiento de identidad(es) local(es)Promover la construcción y fortalecimiento de identidad(es) local(es)•Construir sociedades en el ámbito nacional, regional y localConstruir sociedades en el ámbito nacional, regional y local•Capacitar personas para actuarCapacitar personas para actuar

Sector Cantidad (2005-07

Valores (US$ millones)

Agro-negocios 50 82

Textil y confecciones 37 32Muebles 22 20

Turismo 22 18

Otros 13 14

Construcción civil 10 12

Metal mecánica 8 4Calzados 6 11

Tecnología de la información 4 4

Artesanía 2 2

Total 174 200

México: Avance program (CONACYT)

AVANCE can be seen as a good practice particularly by its design, this is an instrument that was conceived to tackle in a holistic way the problem of converting R&D results into new successful businesses. The main aspects to learn from this instrument are:

•The holistic approach to the instrument’s design, AVANCE as an articulated set of tools designed to tackle different dimensions of innovation from R&D results.

•The flexibility of the instrument’s management to encourage close interaction between the instrument’s team and managers with the applicants, as well as permanent follow-up of the project implementation to avoid deviations.

•Amenability of management to improve the instrument operation by learning from experience.

The core objective of AVANCE consists in the investment of public resources, in cooperation with active businessmen, for the development of new firms or existent business lines, directed toward the production and market launch of new products or the exploitation of new production processes resulting from scientific research results, and capable of generating and maintaining diverse and lasting competitive advantages.

It is a complex instrument, which links several actors from the National Innovation System in the implementation of concrete business initiatives for the creation of sustainable and highly profitable businesses from R&D results. The programme offers three kinds of support:

•Funds to complete the technological development process and to make technology ready for market launch (“last mile”)

•Complementary and temporary support (for as long as 18 months) of risk capital for the set-up of the business;

•Endorsements based on a guarantee fund, to back up loans that might be required in this stage.

As an additional support, the programme has established a collateral fund to finance the design and implementation of entrepreneurial capabilities training programmes (Business Schools) in some local Universities.

The proposals may be submitted by several actors of the NIS: existing firms or in the process of starting up, universities, centres or research groups, entrepreneurs or risk investors. The processing of the applications consists of two stages. During the first, a preliminary appreciation of the robustness of the technology and business idea is carried out. In the second, the proposed work plan is specifically evaluated, a decision is made about the pertinence and the amount of the support to be provided for the last mile phase and/or, when applicable, for the initial capitalization of the firm.

The programme has shown pertinence regarding the objective of fostering high added value and knowledge intensive business initiatives, and supporting the building up of a national investment base in technology-based firms. It is also generating new attitudes amongst researchers, as well as entrepreneurs, in terms of cooperation between firms and research and higher education institutes.

No coevolutive processes of S&T and Innovation are observed

There are some improvements in both the S&T and the Innovation capabilities, but they are not articulated

Changes are required in both populations S&T and Innovation and in their linkages to modify the NIS performance

Changes in the initial endowments of both capabilities ST and I

Changes in the degree and levels of interaction and feedback between both capabilities ST and I

Changes in the characteristics of the bi-directional causal relationships between the capabilities in ST and I

Bases for a STI policy design to generate and foster a co-evolutionary model

II. ASSIGNED TO SPECIFIC INSTRUMENTSI. MORE PUBLIC FUNDS

III. BETTER MANAGEMENT AND EVALUATION OF TEH POLICIES AND THE ASSIGNED RESOURCES

POLICY MIX

STRATEGIC OBJECTIVES

DETERMINE ACTIONS LINES ORIENTED TO :•IMPROVE THE MARKETS FUNCTIONING•MUTUAL LEVERAGING BEWTEEN PRIVATE AND PUBLIC INVESTMENTS IN R&D

•REINFORCEMENT OF THE NIS•IMPROVEMENT OF THE GOVERNMENT ACTION

FOCUS COEVOLUTIVE, SYSTEMIC, DYNAMIC, INSTITUTIONAL

VISION RELATED TO THE COUNTRY THAT WE WANT TO HAVE

REFORMS OF THE PUBLIC RESEARCH SYSTEM

Vision of the country for the design of the strategy

•Economic development based on knowledge and the preservation of the environment

Productive profile oriented to technological capabilities in :Sectores estratégicos (water, energy, nanotech, biotechnology, TICs and sectors of revealed or adquired advantages)Sectors oriented to satisfy social needs

A competitive business sector that contribute to regional development, with a high predominance of SME•Well paid employment•Social development that satisfy basic needs•Broad integration of the potentialities associated with the cultural diversity

• To accelerate the co-evolution between (i) S&T and (ii) Innov:• Make more dynamic the innovation activity of the business sector• Satisfy social needs • Contribute to foster development

• To solve market and system failures:• Promote an adequate incentives structure• Induce interactions between universities and research centers, the

business sector and the federal and regional government

• To foster a dynamic focus of S&T and Innov capabilities accumulation

• To consolidate the S&T and Innov capabilities already built, strengthen problem oriented research and foster an endogenous innovation activity in the business sector

• To transform the research system according to quality, excellence and pertinence criteria

Main features of the STI policy design

To make valuable the contribution of knowledge to economic and social development

The dynamics of a S&T and Innovation policy for transforming the NIS over 20 years

T1 Strengthen ST and Innov, modify the institutional context and consolidate a significant segment of innovative firms

T2 Consolidation of the ST and Innov capabilities oriented towards strategic sectors and acceleration of the innovation activities

T3 Virtuous dynamics: Excellence in ST and generation of endogenous innovation activities in the business sector

0,0

10,0

20,0

30,0

40,0

50,0

60,0

2006 2012 2018 2024

% GERD

Businesssector

Universities,external,othersGovernment

Leveraging and catalytic effects will be associated with the critical mass of additional resources due to dynamics learning economies

T1 T2 T3

Evolution of the policy mix based on the Mexican caseEvolution of the policy mix based on the Mexican case

Expected composition FES&T *

STI Instruments %FES&T 2005 2012 2018 2024

National system of researchers 4.5 2.9 2.7 2.5 Scholarships 6.5 6.3 5.9 5.5 Posdoc positions 0.0 1.6 1.3 0.2 Competitive fund for curiosity driven research 1.0 1.6 3.0 3.7 Centers of excellence 0.0 2.1 4.0 6.2 Support for scientific infrastructure 0.0 1.6 2.0 2.0 Strategic sectoral funds 0.5 1.6 3.9 3.7 C

apabilities S&T

Competitive regional funds 1.0 1.6 3.0 3.7 Competitive fund for innovation 0.3 0.9 0.8 0.3 Subsidy for R&D and innovation 0.2 3.9 3.7 0.2 Support for technological infrastructure and technology transfer 0.0 1.6 2.0 0.5

Funds for technology based firms 0.0 0.8 1.9 0.6 Support for incubators 0.0 0.3 0.9 0.6 Innovation program oriented to basic needs 0.0 0.3 1.1 1.3 C

apabilities Innov

R&D fiscal benefits 9.8 9.5 8.9 5.6 Support for fostering STI culture 0.0 0.3 0.5 0.3 Other ST expenditures (by Conacyt and different ministries) 76.2 63.2 54.5 63.1 Federal Expenditure in S&T 100.0 100.0 100.0 100.0

Reflections on this proposal

• Conversely central economies, the policy mix of the Latin-American countries should consider that the initial endeavors of capabilities are week and should be strengthened.

• A co-evolutionary process of S&T and Innov seems to be focus on:(i) the capabilities, that are required for the emergence of the initial conditions for co-evolutionary processes of S&T and Innov, (ii) the institutions, that should change for being able to move from the actual linear model of STI to a co-evolutionary one.

• Focus on capabilities instead of results, which allow to emphasize learning and culture, and their relationship with capabilities

• The success depends on: (i) generating a critical mass of financial resources, capabilities (human resources, infrastructure, etc.) and activities, (ii) change the policy mix, (iii) introduce institutional changes to induce new social norms that contribute to modify agents` behaviors towards generating co-evolutive dynamics,(iv) the Mexican case suggests that the generation of consensus

between agents and building up a shared vision are key factors.

Recommendations for fostering innovation and firms’ competitiveness

We have to discuss again about controvertial topics

Direct support for firms

Horizontal measuresto increase variety and create a critical mass of innovative firms

Public funding

Commitment of the public sector

Vertical measures togenerate successful

cases

Generation of framework conditions for innovation

Private funding

Let market operate

Specific action lines and measures1. Direct horizontal support to foster innovation activities and R&D capabilities building by the business sector, mainly by the SME, with special attention to prevent opportunism behaviors

To stimulate firms to increase and make a better expenditure in R&D and innovationTo stimulate an increase in the number of firms that spend in R&D and innovationTo use direct grants to induce concurrent private expenditureTo stimulate an alignment between firms’ strategies, including the R&D and innovation strategies

2. Supports oriented to strengthen the mass of HRSTTo increase and improve the supply To stimulate the demand by business firms

3. Promotion of firms’ technological modernization and development of technological services (specially for SME)

4. Innovation culture

5. Financial sources to support public expenditure

1. Direct horizontal support to foster innovation activities and R&D capabilities building by the business sector, mostly by SME, with special attention to prevent opportunism behaviors

-Grants for R&D• 30% of the project budget• Only for firms that have shown potentialities, from strategic sectors and other priorities• Criteria for the budget distribution:

• 30% for projects based on collaboration with other firms and HEI and PRC• 20% for SME projects• 20% for networks of SME• 30% for individual firms• Provide an additional 10% if the firm demonstrate technology transfer to SME

• Continuous financial and technical evaluation

-Very low interest rate credit for R&D (Risk and venture fund/shared with the government) • 30% of the project budget• Only for firms that have shown potentialities, from strategic sectors and other priorities • Criteria for the budget distribution:

• 30% for projects based on collaboration with other firms and with HEI and PRC• 20% for SME projects• 20% for networks of SME• 30% for individual firms

1. It can be complementary for those firms that get the grants for R&D2. Continuous financial and technical evaluation

-Grants for Innovation in SME•50% of the project budget•Continuous financial and technical evaluation

-Competitive funds for innovation (ej. Mexican Sectoral fund of Economy)•Criteria for the budget distribution:

•30% for projects based on collaboration with other firms and the academy; resources can be managed by HEI and PRC•20% for SME projects•20% for networks of SME•30% for individual firms

•Integration of users in the technical evaluation

-Networks/Public-Private Consortia•Program for funding agents oriented to build and strengthen these networks:•Program for funding networks; criteria for the budget distribution:

•70% for sectors that have shown potentialities, strategic sectors and other priorities•30% for projects that integrate SME

-Support the interface function and the capability building in this area by the public research system.

•Support program for the creation and operation of Technology Transfer and Linkages Building Offices in HEI and PRC

2. Supports oriented to strengthen the mass of HRST

SupplySupply:strengthen the engineering capacities and the mass of entrepreneurs: “Iniciativa Ingenierìa para las Amèricas” (EFTA)

DemandDemand: Creation of incentives for the absorption of HRST-PhD and specialists for the industry

•Stimulate the increase of the demand•Horizontal support•Grant for 50% of the salary by 2 years•% for sectors that have shown potentialities, strategic sectors and other priorities•% for SME it can be a pool of engineers that can work for several firms of a sector, they can be hired per project or per hour

-Programs of stays in the industry with scholarships for students-Programs of consultants to support the capability building by firms and foster linkages with HEI and PRC

Hire agents to support firms modernization and build linkages (ej. ATES implemented by the FUMEC-Mexican-US foundation for science)

3. Promotion of firms’ technological modernization and development of technological services (specially for SME)

•Program for the creation of services centers for firms (mainly test and certification) at the HEI and PRC campuses, this can be a mechanism to initiate and consolidate linkages with the business sector, particularly with

4. Innovation culture

5. Financial sources to support public expenditure•Tax for the export of natural resources (ej. The tax for the copper-Chile)