Innovation Policy, Environment and Growth: Basic Comments

1. Innovation Policy, Environment and Growth: Basic Comments Keith Maskus University of Colorado at Boulder Prepared for CIES Workshop Graduate Institute, Geneva, 13 Dec 2011

2. General determinants of innovation • Complex issue; much depends on national circumstances and histories. • Major stimulants are market-based: relative prices, competition and demand growth. • Primary roles of government policy: • General human capital and infrastructure supports; • Neutral fiscal incentives; • Price and regulatory instruments tied to externalities; • IPRs and competition policy; • “National innovation systems” can be effective and even decisive in creating dynamic markets.

3. What drives innovation in ESTs?(Measured by patent applications) • Anticipated market demands; • Relative prices of energy types; • Regulatory provisions; • Costs of investment; • Public grants and subsidies; • Mixed evidence at best regarding patents as stimulus; • Patents may not be an ex ante stimulus but firms do take out patents for commercialization and ITT. • A likely exception is new agricultural and industrial biotech (biofuels, etc.) solutions. • Unlikely that promise of patents in poor countries will induce innovation for their needs.

4. Combining public and private mechanisms • In general the roles are separate. • Where does useful scope exist for public-private (including foundations) collaboration? • Research initiatives in “Pasteur’s Quadrant”. • Linking public funding for research and product procurement to distribution and adaptation. • Access-oriented licensing models. • Such initiatives are increasingly successful in: • public health (medicines) • university and foundation licensing commitments.

5. Innovation policies in developing countries • Policy experiences and outcomes are just as variable in developing countries (Odagiri et al 2010). • Some policy factors that seem to matter positively: • Building a strong engineering and entrepreneurial human capital endowment. • Openness to global technology markets, including acquisition of lower-cost second-tier technologies. • Emphasis on rapid technology diffusion and adaptation among otherwise competitive firms. • Incentives for R&D capacity in local enterprises. • Facilitating information flows about promising areas of science and engineering. • Sound university & public research and extension systems. • Calibrated intellectual property systems.

6. Challenges for innovation policies • Relative scarcity of resources and expertise. • Small and distorted markets, including for technology. • Limited incentives for investments in even adaptive innovation. • Emerging international information barriers in science and technology. • Costs of searching, acquiring and using IPRs.

7. Knowledge gaps about poor-country innovation and creativity • Little systematic evidence of what drives innovation and creativity and creates knowledge among the poor (what are inputs?). • Available measures do not capture its scope and breadth (what are outputs?). • Such innovation can be straightforward and incremental; complex and heterogeneous (what are the innovation processes?). • What are risks and impediments in bringing innovation to markets? • How to incentivize local adaptive innovation for specific needs?

8. Addressing knowledge gaps • Develop or extend household and enterprise surveys that are taken consistently over a period of years. • Processes, ownership, use of knowledge. • Historic or anticipated reactions to changes in business/policy environments, including IPR. • Develop more analytical work on the microeconomics of creativity. • Functioning of local innovation/creation markets. • Role of finance, especially micro-finance (itself a source of data). • How enterprises extend marketing beyond village level. • Efficiency and equity of norms and protection/sharing mechanisms in traditional knowledge. • Consider new metrics of innovation and creativity.