Toward a data collection & research agenda to promote inclusive innovation and growth

1. Toward a data collection & research agenda to promote inclusive innovation and growth Objective: to understand how the IP-SMEs nexus matters for inclusive growth, and the policy implications thereof… Mark Dutz WIPO Expert Group Meeting, Geneva, September 17-18, 2009

2. Overview of presentation 1. India’s context as motivation (WHY) • Economic dualism • Productivity dispersion Inclusive innovation 2. Enabling environment for innovation (WHAT) • Competition as key spur to innovation • Skills and absorptive capacity • Targeted policy options for inclusive innovation 3. Complementary strategies (HOW) • Asking the right questions • Connecting datasets, projects, institutions and researchers

3. 1. Broad definition of inclusive innovation:creation & absorption relevant for the poor CREATION & COMMERCIALIZATION DIFFUSION & ABSORPTION Product Innovation Process Innovation Shifting out the global frontier of knowledge Moving toward the global frontier of knowledge Organizational Innovation Sustainable and Inclusive Growth

4. Inclusive innovation is needed to respond to the reality of dual economies Context • Nuclear and space power • Top innovation player Challenge • Pro-growth competitiveness agenda 11% of employment Formal Sector Informal Sector 89% Context • 1/4 of population below poverty • 70% rural, 46% of women illiterate Challenge • Pro-poor inclusiveness agenda

5. KNOWLEDGE DIFFUSION AND ABSORPTION KNOWLEDGE CREATION AND COMMERCIALIZATION INCLUSIVE INNOVATION ENABLING ENVIRONMENT 2. IP-SMEs as one part of a broad enabling environment INCREASED PRODUCTIVITY & WELFARE THROUGH BROAD INNOVATION COMPETITION SKILLS AND EDUCATION INFORMATION INFRASTRUCTURE INNOVATION FINANCE

7. Competition is critical for innovation: Pharma industry success story • TRIPS provided “stick” by foreclosing growth thru simple imitation in developing country weak patent markets, providing imperative to seek new opportunities • trade/FDI reform and devaluation in early 90s reinforced attractiveness of process innovation “carrot”: relaxed regulatory hurdles of US generics market (& bulk drugs), from Hatch-Waxman Act of 1984 • future: from “upgrading of manufacturing & process R&D capabilities” to “more substantive product development”? • (see Ashish Arora et al., “Strong Medicine? Patent Reform and the Transformation of the Indian Pharmaceutical Industry”, mimeo, July 2008)

8. Brazil 17.1 Russia 28.2 India 10.4 China 35.3 Korea, Rep 80.5 Mexico 64.2 OECD 68.6 0 10 20 30 40 50 60 70 80 90 To spur experimentation & risk-taking, reform bankruptcy for easier re-entry Recovery Rateswhen Closing a Business (cents on $) • increase competition & innovation by reforming bankruptcy process

9. To promote continuous learning, invest more for in-service training % Formal Manufacturing Firms offering In-Service Training These firms are 25% more productive • increase quality and quantity of education and training to increase skills

10. Targeted policy options to make innovation work better for all, with IP-SME components (1) Formal creation activities • Soft loans & matching grant support for R&D • Public procurement to raise demand for innovation (2) Hi-tech & grassroots commercialization • Advisory services to make start-ups “VC-ready” • Support for early-stage Venture Capital funding • Special IPRs for traditional/grassroots knowledge? (3) Absorption of knowledge by enterprises • Cluster-based technology upgrading • Diaspora mobilization

11. (1) Enhance commercially-driven R&D Strengthen & scale-up existing programs thru risk- sharing competitive matching grant funding & PPPs: • Appropriate technologies: program for individual SMEs or collaborations for pro-growth or inclusive projects, building on • SPREAD (ICICI’s Sponsored R&D program, 89/02) • PRDSF (DST’s Pharmaceutical R&D Support Fund, 04) • SBIRI (DBT’s Small Business Innovation Research Initiative, 06) • Frontier technologies: program for consortia of firms, R&D labs and universities, building on • NMITLI (CSIR’s New Millennium Indian Technology Leadership Initiative, 03) • OSDD (CSIR’s Open Source Drug Discovery consortium, 08)

12. (2) Promote commercialization Build early-stage technology-oriented companies • Hi-tech ventures from R&D labs, universities and others • Rural grassroots informal business ventures • Deal flow support services: increase quality and volume of deal flow thru support to “Tech Assistance Companies” • services include technology/market assessment, business plan formulation, testing/validation, market linkage development, and legal advice on IP strategy (+ PFCs, TTOs, IP support, subsidies for foreign filings) • Risk capital finance: SPV to manage 2 kinds of funds-of-funds for demonstration impact • FOF Tech: investments in advanced technology ventures (building on APIDC, GVFL, ICICI Knowledge Park Fund, etc.) • FOF BOP: riskier investments in ventures to benefit the poor (building on Aavishkaar, Acumen Fund, Soros/Omidyar/Google SME Fund, etc.)

13. (3) Help firms better absorb knowledge Introduce institutionalized “strategic” pilots(scalable, with clear governance and accountability structures to spur learning) • based on search networks (to unblock constraints to development) • beneficiaries re-assemble existing programs (to meet local needs) • supported by bottom-up contests for matching grants • Support SME-led cluster initiatives • Matching grants to strengthen technology upgrading initiatives (building on MSME’s Micro and Small Enterprises Cluster Development Program) • Improve access to global knowledge • Matching grants to strengthen capabilities of diaspora networks (building on the Overseas Indian Facilitation Centre, a PPP between the Ministry of Overseas Indian Affairs and the Confed. of Indian Industries)

14. 3. “What we measure affects what we do… with wrong measures, we strive for the wrong things” Toward better measures • It’s all about implementation: How best to measure de facto enforcement of IP across countries? (vsde jure rules) • It’s not no. of patents but commercializable value generated • Better diffusion of existing knowledge is critical: do stronger IPs facilitate better diffusion? (e.g. patent disclosures used?) • How assess impact of S&T capabilities on IP-SME outcomes? • What are best metrics of inclusive innovation & creativity by SMEs spurred by IP? Data-based evaluation of policy outcomes • Evidence-based assessment of what works and doesn’t: what are most compelling success stories? • Ex-ante: Include elements of randomized field trials (treatment vs control group) in programs • Ex-post: Conduct regular, independent evaluations with international benchmarking

15. 3. “What we measure affects what we do… with wrong measures, we strive for the wrong things” Toward better measures • It’s all about implementation: How best to measure de facto enforcement of IP across countries? (vsde jure rules) • It’s not no. of patents but commercializable value generated • Better diffusion of existing knowledge is critical: do stronger IPs facilitate better diffusion? (e.g. patent disclosures used?) • How assess impact of S&T capabilities on IP-SME outcomes? • What are best metrics of inclusive innovation & creativity by SMEs spurred by IP? Data-based evaluation of policy outcomes • Evidence-based assessment of what works and doesn’t: what are most compelling success stories? • Ex-ante: Include elements of randomized field trials (treatment vs control group) in programs • Ex-post: Conduct regular, independent evaluations with international benchmarking

16. 3. “What we measure affects what we do… with wrong measures, we strive for the wrong things” Toward better measures • It’s all about implementation: How best to measure de facto enforcement of IP across countries? (vsde jure rules) • It’s not no. of patents but commercializable value generated • Better diffusion of existing knowledge is critical: do stronger IPs facilitate better diffusion? (e.g. patent disclosures used?) • How assess impact of S&T capabilities on IP-SME outcomes? • What are best metrics of inclusive innovation & creativity by SMEs spurred by IP? Data-based evaluation of policy outcomes • Evidence-based assessment of what works and doesn’t: what are most compelling success stories? • Ex-ante: Include elements of randomized field trials (treatment vs control group) in programs • Ex-post: Conduct regular, independent evaluations with international benchmarking

17. The more technologically advanced developing countries are good candidates for initial studies… • Asian tigers = Taiwan (70,643), So.Korea (57,968), Singapore (4,097), Hong Kong (3,805) • Emerging 8 = China (5,162), India (4,080), So.Africa (3,976), Hungary (2,871), Mexico (2,509), Russia (2,409), Brazil (2,094), Argentina (1,249) • - cumulative patents granted in US to end-08 in parentheses

18. …because they reap the shorter-term benefits of a stronger IP regime

19. Possible initiatives: Connecting datasets, projects, institutions and researchers Start by focusing on a few advanced MICs • Begin where most likely to find solid results • Connect existing firm-level datasets with IP filings data • India: Prowess database maintained by CMIE (Dutta and Sharma, 09) • Sri Lanka: SL Longitudinal Survey of Enterprises (de Mel et al., 09) • WB Enterprise Surveys: approx 60 countries with R&D data (Sharma, 07) • Set up collaborative web site and link in-country researchers across a few initial target countries, together with policy implementers not just from Patent and Trademark Offices but Ministries of Economy, Industry, S&T, etc. • Partner with 2-3 ongoing SME-focused projects to sharpen project evaluation and continuous improvement, and add/strengthen IP-SME dimension of projects (& complements) • India: SBIRI (DBT, MOST); IIT Mumbai business incubator; Technology Upgrading Program (TIFAC, MOST & MSME); Patent Facilitating Center and 20+ PICs (TIFAC); The Center for Genomic Application (PPP R&D center)… • So. Africa: Automotive Component Supplier Development Program (DTI)