Science, Technology and Innovation (STI) and Development

1. Science, Technology and Innovation (STI) and Development Michael Lim Policy Review Section Science, Technology and ICT Branch UNCTAD-DTL Michael.lim@unctad.org Geneva 5 April 2011

2. Outline • Technology and economic growth • Science, technology and innovation (STI) • Innovation systems • National policies for developing STI • National and global challenges

3. The Global Distribution of Knowledge(from UNCTAD LDCR 2007)

4. The Global Distribution of Poverty(from UNCTAD LDCR 2007)

5. Economic growth and income trends: 3 big issues to explain • There is huge variation in per capita income across countries. Why? • There is huge variation in growth across countries. Why? • Global growth was close to zero until about 1500, rose slightly until about 1800, and has accelerated since 1800. Growth patterns varied by region and country (and this continues). Why?

6. Technology and economic growth (1) • Output (Y) is a function of capital (K), labour (L) and technology (T) Y=f(K, L, T) or Output (Y) is a function of physical capital (Kp), human capital (Kh), labour (L), and technology (T) Y=f(Kp, Kh, L, T) In standard neoclassical growth theory Y =T*f(Kp, Kh, L) with technology (T) exogenous (external) ie T=f(?) T is unexplained Kp=f(Kpt, It) It is new investment in physical capital Kh=f(Kht, Iht) Iht new investment in education and training and health L=f(Lt, grL) grL is population growth

7. Technology and economic growth (2) • Economic growth is directly a function of Kp, Kh and improved technologies. • Controversy over the relative importance of each. • Additional growth determinants: Initial conditions; institutions and incentive structures; geography; national policies; perhaps culture.

8. Technology as a source of growth • Since about 1770 technological development has been a major source of global economic growth. The Industrial Revolution in England (1770-1800+) was a notable spur to growth and the start of intensive application of STI to economic production.

9. What is technology? • Technology is knowledge applied to the production of goods or services. • Different forms: - physical machinery -production processes -software -tacit knowledge

10. What is innovation? • Broad definition: The introduction of new or improved products, or of new or improved processes and organizational methods in the design, production and distribution of goods and services. • Invention: A new, useful process, machine, improvement, etc., that did not exist previously and that is recognized as the product of some unique intuition or genius.

11. Types of innovation • All along the production value chain: production, design, distribution and marketing. • Technological (related to the introduction of new technologies) or non-technological (organizational, managerial or institutional). • Incremental (through small improvements), radical (through major breakthroughs) or revolutionary (a fundamentally important new technology is created).

12. Is STI important?Innovative Capabilities and Income(from UNCTAD LDCR 2007)

13. STI applications • Building strong STI capabilities, accessing foreign technologies and building strong national systems of innovation are important for economic growth, social welfare and addressing environmental challenges. • STI applications: -improving productivity in manufacturing, agriculture and services -preventing food crises (starvation) -increasing value added, diversifying production -mitigating/adapting to climate change -developing new energy sources – renewable energy -water management -public services (health, education) -addressing disease epidemics -organizing mega-cities (smart urban planning) -early warning systems for natural disasters (tsunamis, hurricanes) -slowing desertification etc.

14. Channels of international technology transfer • entry and operation of foreign enterprises (includes FDI and non-FDI) • joint ventures or strategic partnerships • the movement of staff between foreign and domestic enterprises • domestic enterprises forming linkages with TNCs • domestic enterprises investing in (or buying) foreign enterprises • imports of machinery • Study through reverse engineering and imitation • licensing agreements • technical cooperation activities • accessing technology from technical publications, journals or patent databases

15. STI capabilities: what are they? (1) • Scientific, technological and innovative capabilities. • Broad definition add capabilities in engineering, other technical capabilities, entrepreneurship, management and organizational capabilities. • STI capabilities vary by country, industry and enterprise.

16. STI capabilities: What are they? (2) • Scientific capabilities – the ability to learn, understand and apply scientific knowledge and skills to solve problems. • Engineering capabilities – the ability to learn, understand and apply engineering knowledge and skills to solve problems. • Technological capabilities – the ability to learn, understand and master the use of existing (both traditional and recent) technologies to solve problems;the ability to produce new technologies. • Innovative capabilities – the ability to innovate. • Technological learning by enterprises (firms and farmers most importantly) is important for technological development of a country.

17. Linear models of innovation

18. Framework conditions ▪ Financial environment ▪ Taxation and incentives ▪ Propensity for innovation andentrepreneurship ▪ Trust ▪ Mobility ▪ Education, Literacy Demand ▪ Consumers (final demand) ▪ Producers (intermediate demand) Business system ▪ Companies ▪ Farms ▪ Healthcare, etc Education and research system ▪ Professional education and training ▪ Higher education and research ▪ Public sector research Intermediate Organizations ▪ Research institutes ▪ Brokers, etc Infrastructure ▪ Banking, venture capital ▪ IPR and information system ▪ Innovation and business support system ▪ Standards and norms A National system of innovation(from Arnold and Bell (2001))

19. National policies for STI development (2) STI policy (S&T policy, innovation policy, S&T/innovation strategies) Education and training policies Trade policies Foreign direct investment (FDI) and TNC policies Intellectual property (IP) policies Technology transfer policies S&T infrastructure policies Financial sector policies Macroeconomic policies Industrial policies 19

20. National policies for STI development (3) Physical infrastructure policies (esp. energy, physical clusters (science parks, S&T parks, ICT parks) Migration policies (skilled migrants and brain circulation) MSME policies Policies to support technology start-ups Policies to link SMEs to value chains Entrepreneurship policies Competition policies Metrology, standardization, testing and quality (MSTQ) policies Government procurement policies Cluster policies (IT in Penang, Malaysia) Developing STI indicators to aid policymaking 20

21. Stages of technology development by innovation effort(from UNCTAD, WIR 2005) FRONTIER INNOVATION TECHNOLOGY IMPROVEMENT & MONITORING SIGNIFICANT ADAPTATION BASIC PRODUCTION 21

22. Typology of STI policy goals at different stages of development Distant technological laggard countries (early stage). Technological laggard countries (later stage). Near technological frontier countries. At the technological frontier countries. 22

23. National and global challenges • Natural resource depletion • Food crises – malnutrition, starvation • Climate change • Energy challenge – fossil fuels and RETs • Growth, employment and natural resource sustainability • Malthusian trap?

24. STI and climate change • STI role in adaptation and mitigation (green economy) • Many activities/industries (energy, transport, agriculture etc) • Diffuse existing environmentally sound technologies (ToT) (UNFCCC) - RETs • Develop (and diffuse) new technologies • Capacity building (for technology absorption) in some countries • Building innovative capabilities for CC

25. STI and climate change (2) • Dichotomy of commercial interest versus public good (reduced GhG emissions) • Issue of IPRs • Issue of financing ToT and capacity building • Post-global crisis (2008-9) stimulus plans and STI for CC

26. Conclusions • Strong STI capabilities, human capital and innovation systems, and easy access to foreign technologies, are important for growth and development, social welfare and facing environmental challenges. • National policy action critical to support each of them for optimal growth and development impact. • STI policies should ideally be a coherent part of a country’s national development policy and strategy (including PRSPs in LDCs). • There are many challenges; STI badly needed

27. Discussion issues • What is the purpose of science: Conquer nature? Help mankind? • Is technology always good? • Is innovation always good? • Do all countries innovate? • Can STI prevent a Malthusian trap? • Do we have the wisdom to manage technologies?

28. End