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Policy Implications for Knowledge Absorption June 17 , 2008

Policy Implications for Knowledge Absorption June 17 , 2008. Itzhak Goldberg Advisor, Policy and Strategy Europe and Central Asia Region World Bank. Globalization Challenge: BRIC countries. Growth Productivity. Labor. Capital. Human Capital. Innovation Absorption. Investment Climate.

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Policy Implications for Knowledge Absorption June 17 , 2008

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  1. Policy Implications for Knowledge Absorption June 17, 2008 Itzhak Goldberg Advisor, Policy and Strategy Europe and Central Asia Region World Bank

  2. Globalization Challenge: BRIC countries Growth Productivity Labor Capital Human Capital Innovation Absorption Investment Climate R&D Trade & FDI Patents and Patent Citations Source: Authors’ Calculations from World Bank Enterprise Surveys

  3. I discuss both Innovation and Technology – continuum Examples Absorption “New to the firm” • Adopt new product, process, • Upgrade old product, process; • Quality certification; • Technology license Innovation “New to the World” Invent new technology or product

  4. Market failures may justify government intervention BUT Government failures: capture, corruption,must be accounted in design AND How… Role of Government – the 2 schools

  5. What Can Governments Do? • Investment Climate: openness to trade, FDI, R&D collaboration, corporate governance - my focus today • Restructuring of old structures (ECAKE3 – next Forum) • New institutions & instruments: matching grants, VC, parks and incubators. (ECAKE1 and ECAKE3)

  6. Openness to Trade & FDI Surveys of circa 7000 ECA firms show: • Transition to export status increases absorption by about 33% • Joint-Venture with a multinational increases absorption by 41%

  7. Openness to FDI Serbian case study: Production↑ 3.5 times, productivity↑ 7.2 times, wages↑ 20%

  8. Multinational collaboration patents: (i) connected to global R&D (ii) higher quality. Policy recommendation: Promote international R&D collaboration E.g. Matching Grants for Consortia – target Missing University-Business Link Openness to International Collaboration

  9. China Finding: Effect of MNEs’ R&D in Z-Park on: • Entry of new domestic firms into same industry in Z-Park • R&D volume of the entering domestic firms • Entry of existing domestic firms from elsewhere in China to Z-Park Cai, Todo and Zhou (2007) “Do MNEs’ R&D stimulate indigenous entrepreneurship – evidence from China’s Silicon Valley”

  10. China Finding: Effect of MNEs’ R&D in Z-Park on: • Entry of new domestic firms into same industry in Z-Park • R&D volume of the entering domestic firms • Entry of existing domestic firms from elsewhere in China to Z-Park Cai, Todo and Zhou (2007) “Do MNEs’ R&D stimulate indigenous entrepreneurship – evidence from China’s Silicon Valley”

  11. Corporate Governance →Innovation • Risk–taking depends on corporate governance. • Bankruptcy – attitude to failure • Serbian case-studies: strategic owner, foreign or local >> improves corporate governance >> increases technology absorption.

  12. E.g. investment Climate in Russia Venture Capital lacks “Deal-Flow”

  13. Absorption depends on Local R&D Expats’s critical role China’s “Sea Turtles” ECA: proximity to EU: return migration, outsourcing → absorption R&D reform →R&D collaboration R&D-driven FDI effects Sequencing: R&D→ deal flow→ seed→ VC Lessons for Policy

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