Innovation Systems and Development Strategies

Thomas Andersson Santiago, Chile13 May 2004

IKEDIKED addresses the emerging issues of the knowledge-based economy (KBE), with a holistic view and a cross-sectional approach Bridges between research/analysis and policy-making

Has a Nordic base, leveraging the Nordic regions strength in KBE as well as the Nordic need of learning from others to confront current challenges Has a global reach working with countries and institutions, aiming for concrete reforms Has partners/clients ranging from the most advanced to transition and least developed economies Collaborates with and includes all key stakeholders, including the private sector and consumer side, in its activities/projects in order to promote contructive dialogue and concrete results

IKED Integrated ApproachIntegrity and internal analysisNetworks between government, business and experts

Flagship Publications 2004ASEM Proceedings: Globalisation and ICT: The Role of Government, Private Sector and Civil Society in an Information Society for AllWorld Competitiveness Proceedings: Innovative Clusters A New ChallengeTowards a New Growth and Innovation Policy in NorwayTowards Effective Policies for Innovation and Enterprise in the Baltic Sea RegionHandbook for Evaluation of Innovation Policy

Flagship Conferences organized/co-organized by IKED 2003-2004Future Nordic Welfare Society (Stockholm, February 5, 2003)An Information Society for All, ASEM (Malm, March 10-12, 2003)The Competitiveness Institute (Gothenburg, September 15-17, 2003)Baltic Development Forum (Riga, October 5-7, 2003)World Knowledge Forum (Soeul, October 15-17, 2003)Virtual Opportunity Congress (Sydney, December 16-17, 2003)INSME Roundtable (Malm/Helsingborg, February 25-27, 2004)Measuring and Analysing Digital Divides (Beijing, March 24-26, 2004) Welfare policies in the Era of Globalisation (Havana, April 26-29, 2004)

Source: UNCTAD, World Investment Report 2002. Manufactured exports share in world exports by technology groupings

The Digital Divide and ICT InfrastructureSource: ITU (2002).

IKEDIKED 2004

Broadening basis for growth Room for higher productivity - R&D and ICT can generate higher labor productivity and TFP - Synergy effects/enabling conditions- Favorable cross-border resource flows - Using time better: hours worked, life-long health- Encompassing SMEs- Regional and sectoral broadening- Untapped potential population groups: immigrants, women, minorities

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Supply:Science,R&DDemand: MarketIdeastechnologiesInnovationsScientistsClientsContractorsCompetitorsINNOVATION SPIRALIncreased potential both directions through ICT

Improving exchange mechanisms among actorsUniversitiesSocietyIndividualsCompaniesRewardBuilding new companiesSkillsCompetitiveintelligenceProduct developmentEntrepreneurshipEnvironmental sustainabilityICT-infrastructureCareerConditions for competitionUniversity/Private sectorcooperationLabour markets

EducationSocial capitalApplied researchIPRTax systemsVenturecapitalFinancial marketsDemand for knowledgeStrengthening framework conditions to support innovation processesInnovations,Commers-ialisationGrowth and welfareActors

SWEDENFINLANDUSAJAPANSWITZERLANDWORLDFINLANDUSSWEDENCANADAKOREADENMARKSINGAPOREAUSTRALIAKOREANETHERLANDSICT Weighted country positions InnovationTentative, based on international estimates

Investment in knowledge assets, % GDP 200002468MexicoGreecePortugalItalySpainHungaryIrelandCzech RepublicAustriaEUBelgiumAustraliaUnited KingdomNorwayFranceGermanyNetherlandsDenmarkOECDJapanCanadaSwitzerlandFinlandKoreaUnited StatesSweden%R&DSoftwareHigher EducationIKEDIKED 2004

Government role in R&D varies considerably across countries, % of GDP 2000

IKEDIKED 2004

Share of government in total R&D

United States

Japan

Germany

France

United Kingdom

Korea

Italy

Canada

Netherlands

Sweden

Australia

Spain

Switzerland

Finland

Belgium

Austria

Denmark

Mexico

Poland

Norway

Turkey

Czech Republic

Ireland

Portugal

New Zealand

Hungary

Greece

Iceland

15

25

35

45

55

65

75

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Gross expenditure on R&D as % of GDP

Government-financed R&D in million

USD

Selected variables Innovation System

Diagr2

36.7814.986.28

8.0720.8610.68

419.454.18

6.26.661.34

7.7111.77.02

22.1424.8616.34

High-Tech. as % of manufact. exports, 1999 (2001 WDI)

Professional and technical workers as % of the labor force (2000 ILO)

Tertiary science & engineering enrolment (2001 WDI)

Blad1

Table 6: Cross Country KBE Data

East AsiaEurope and Central AsiaMENAAfricaLACG7

Variables of performance & of Economic Regime

Average Annual GDP growth 1990-99 (%) (2001 WDI)5.76-1.744.143.623.672

Human Development Index 1999 (2001 UNDP)0.760.790.710.490.760.93

Productivity growth (% change of GDP per person employed) 2000 (2001 IMD)1.886.12-5.666.78-0.241.44

Gross Capital Formation as % of GDP ( Average) 1990-1999 (2001 SIMA)30.3624.5621.9417.9120.9320.86

Trade as % of GDP, 1999 (2001 WDI)115.9895.2580.8569.1764.1842.14

Tariff & nontariff barriers 2001 (2001 Heritage Fdn)6.556.634.943.656.138

Property Rights (2001 Heritage Fdn)6.185.755.765.185.759.14

Intellectual Property is well protected (2001 WEF)3.633.454.533.453.216.07

Adequate regulations & supervision of financial institutions (2001 IMD)5.805.257.357.776.186.75

Local competition (2001 WEF)5.204.875.234.784.775.91

Variables of governance

Regulatory framework (2001 WBI)0.40-0.140.11-0.090.420.93

Rule of Law (2001 WBI)0.330.050.28-0.3-0.121.43

Government Effectiveness (2001 WBI)0.45-0.060.21-0.28-0.151.37

Political stability (2001 WBI)0.370.180.14-0.420.131.11

Control of Corruption (2001 WBI)0.10-0.060.02-0.43-0.141.39

Press freedom 2001 (Freedom House 2001)48.1041.565.8849.783418.71

Variables for innovation systems

FDI as % of GDP 1990-1999 (2001 SIMA)3.711.980.911.082.691.15

Royalty and license fees payments 1999 (2001 WDI)5.133.493.011.443.968.38

R&D Expenditure as % of GNI, 1987-1997 (2001 WDI )0.750.780.570.390.422.27

Tertiary science & engineering enrolment (2001 WDI)6.2810.684.181.347.0216.34

Researchers in R&D (UNESCO 1999)89290.5055048.314597.178289.49604325537.7

Manuf. Trade as % of GDP (SIMA)113.9760.333025.0528.6533.89

Research collaboration between companies and universities (2001 WEF)4.183.584.033.63.034.9

Entrepreneurship among Managers (2001 IMD)5.846.277.245.075.885.77

Number of technical papers 1997 (2001 WDI)2.924.292.971.612.416.15

Admin. Burden for Start-Ups ( 2001 WEF )5.073.954.974.323.794.94

Availability of Venture capital (2001 WEF)3.382.753.932.832.494.61

Patent applications granted by the USPTO (2000 USPTO)2.030.590.550.160.364.75

High-Tech. as % of manufact. exports, 1999 (2001 WDI)36.788.0746.27.7122.14

Private sector spending on R&D (2001 WEF)3.963.473.773.423.095.4

Variables for education and human resources

Primary Pupil per teacher ratio, 1998 (2001 SIMA )27.5017.2322.440.527.1416.83

Adult literacy rate (% above age 15) 1999 (2001 UNDP)88.5697.5672.8865.0189.0499

Secondary Enrollment 1998 (SIMA)73.0083.3371.1834.6374.88109.14

Tertiary enrollment 1998 (2001 WDI)24.6039.0620.314.6123.7359.57

Public spending on education as % of GDP, 1999 (WDI 2001)2.814.864.033.993.564.99

Professional and technical workers as % of the labor force (2000 ILO)14.9820.8619.456.6611.724.86

8th grade achievement in science (TIMSS 1999)496.25519.67423.8243420525.8

Extent of Staff Training 2001 WEF4.243.654.134.053.555.47

First-class management education available (2001 WEF)4.334.154.373.854.295.74

Well educated people do not emigrate (2001 IMD)4.704.926.062.084.815.95

University education meets the needs of a competitive economy (2001 IMD)4.955.478.295.15.115.57

Variables for ICT

Information Society Index (IDC) 200033.1133.8641.2540.540.5712.43

Telephone per 1,000 people, 1999 (2000 ITU)4.915.524.772.494.786.4

Mobile phones per 1,000 people, 1999 (2000 ITU)4.804.293.81.894.336.19

Computers per 1,000 persons 1999 (2000 ITU)3.634.093.461.723.455.69

TV Sets per 1,000 people, 1999 (2001 WDI)5.325.985.353.595.286.48

Daily newspapers per 1,000 people, 1996 (2001 WDI)4.444.83.992.424.235.48

Investment in telecom as % of GDP 1998 (2001 IMD)0.860.860.461.660.790.4

Rating of computer processing power as % of total worldwide MIPS 1998 (2001)0.730.470.330.390.578.98

Internet hosts per 10,000 people, 2000, (2001 ITU)2.443.251.630.932.355.97

International telecommunications, cost of call to US ($/3 min) 1999 (2001 WDI)3.643.337.217.423.431.09

ICT Expenditure as % of GDP 1999 (2001 WDI)4.904.55.347.175.67.11

Source: World Bank Institute, 2002 , KAM, http://www1.worldbank.org/gdln/Programs/kam2002

Blad1

000

000

000

000

000

000

Average Annual GDP growth 1990-99 (%) (2001 WDI)

Human Development Index 1999 (2001 UNDP)

Productivity growth (% change of GDP per person employed) 2000 (2001 IMD)

Variables of Performance

Blad2

000

000

000

000

000

000

High-Tech. as % of manufact. exports, 1999 (2001 WDI)

Professional and technical workers as % of the labor force (2000 ILO)

Tertiary science & engineering enrolment (2001 WDI)

Blad3

Barriers to entrepreneurshipSource: OECDIKEDIKED 2004

GDP-growth and entrepreneurshipU.S.U.K.SwitzerlandSwedenSpainPortugalNorwayNetherlandsLuxembourgJapanItalyIrelandIcelandGreeceGermanyFranceFinlandBelgiumDenmarkAustria01234567456789101112131415Start-up Rates, 1988-96 GDP Growth, 1989-99Source: OECDSource: OECD, 2001

Application of Rule of Law Varies by Region (based on aggregation of surveys/polls 1997-99*)OECDEastAsiaMiddleEastSouthAsiaEasternEuropeLatinAmericaSub-SaharanAfricaFormerSovietUnionHigh Indexof Rule of LawAppli-cationLowIndexSource: Kaufmann, Kraay and Zoido-Lobaton (1999). "Aggregating Governance Indicators" and "Governance Matters" PWRP 2195 and 2196. http://www.worldbank.org/wbi/governance

Patents invented in collaboration with foreign inventors (%)Share of scientific publications with a foreign co-author (%)051015202530JapanEUItalyGermanyUnited StatesFranceOECDUnited KingdomCanada1985-871993-950510152025303540JapanEUUnited States OECDUnited KingdomCanadaGermanyFranceItaly19811995-97International co-operation in S&TIKEDIKED 2004

Bilateral Investment Treaties, 2003Source: UNCTADSource: UNCTAD, 2003

Figure I.13.BitsNOW12

Figure I.12. Density mapping on BITs worldwide, 1 January 2003

01 to 3031 to 6061 to 90> 91

Figure I.14.DttsNOW13

Figure I.13. Density mapping on DTTs worldwide, 1 January 2003

01 to 3031 to 6061 to 90> 91

Source: UNCTAD, database on DTTs.

Challenges for National FDI Policies

Coordination to put in place comprehensive innovation policyAppropriate mechanisms for public funding of R&DScience-industry interplay: incentives for university and scientists to work with industry, upgrading science parks and incubatorsReforms to strengthen conditions for provision of micro-funding and better functioning venture capital markets Valuing knowledge, competence upgrading in SMEs, enabling meeting specific needs through internal upskilling or strengthened networking with regard to external competencePlugging into global knowledge networks while underpinning traditional skills through institutional supportIntensifying policy challenges

ScientistsInnovation Policy Positioning: Traditional ResearchEducationIndustryFinanceTradeEtc.LabourUnionsFirmsNGOsEnvironmentI.P.

ScientistsInnovation Policy Positioning: Implicit ResearchEducationIndustryFinanceTradeEtc.LabourUnionsFirmsNGOsEnvironment

Scientists ResearchEducationIndustryFinanceTradeEtc.LabourUnionsFirmsNGOsEnvironmentInnovation Policy: Explicit positioningI. P.

Scientists ResearchEducationIndustryFinanceTradeEtc.LabourUnionsFirmsNGOsEnvironmentInnovation Policy: Explicit Positioning

I. P.

Inward FDI stock, 2002Note: The size of the region/country's box reflects the size of the FDI stock. Source: UNCTAD

-- knowledge intensity is increasing due to increase in R&D expenditure and software spending-- R&D more business driven + changing composition (less to defence more to emerging sectors)A major effort that draws mainly on STI databases to develop internationally comparable indicators and provide a picture of the trends and implications of the knowledge-based economy