Knowledge Economy Forum VIII Reforming Innovation Systems: Moving Beyond Lectures and Labs

1. Knowledge Economy Forum VIII Reforming Innovation Systems: Moving Beyond Lectures and Labs CLOSING REMARKS Fernando Montes-Negret World Bank

2. Keeping Things in Perspective “… Capitalism has brought to consumers in developed economies vast riches unheard in previous centuries. The average North American, European, or Japanese consumer has a higher standard of living than a medieval king.” G.A. Akerloff & R. J. Shiller, Animal Spirits, 2009, p.171

3. Keeping Lisbon on the Agenda CRISIS AS A GOLDEN OPPORTUNITY to accelerate structural changes and move to more sustainable growth • Prepare ECA countries for the upturn of the global business cycle • Avoid short-term measures that affect long-term growth potential • R&D Expenditures as a mechanism for enhancing competitiveness • Keep a long term view of priorities in crisis: Deal with the urgent, but do not forget the important -Shigeo Katsu, ECAVP, World Bank • Innovation in Traditional Indicators needed to capture dynamic reality in emerging countries -Dean Soumitra Dutta, INSEAD • Decentralization of Innovation requires: Coordination, Cooperation, Competition -Anneli Pauli, Deputy Director, DG Research, EC.

4. Pro-cyclical R&D &Government Role • DOUBLE-DIVIDEN ACTIONS can strengthen demand and growth: • Investments in infrastructure • Training and active labour market policies • Easing of entry restrictions to create new markets

5. Geographically-limited financial crisis, booming global demand Strategy: Export-led recovery, re-industrialization Policy: From macro to micro Unutilized human capital 1/10 of R&D outsourced Basic knowledge jobs Technical Improving competitiveness Global financial crisis,contracting global demand Strategy: Domestic demand, boost competences, “sit out” Policy: Micro-micro Weak entrepreneurial spirit 1/4 of R&D outsourced Advanced knowledge jobs Non-technical Loosing ground Early 1990s vs. Current CrisisFINLAND

6. Recipe for Growth: Talent, Finance for R&DKOREA

7. Recipe for Growth: Talent, Finance for R&DKOREA

8. Recipe for Growth: Talent, Finance for R&DKOREA

9. Innovation and Technology Policy:Still A Priority ! CROATIA: Compound growth rates for Convergence • Even small acceleration on a sustainable basis accumulates into a large impact in living standards for future generation. • Linear extrapolation of the average growth rates indicates that Croatia’s per capita income in 50 years would correspond to 60 percent the U.S. level, an outcome reached by EU-27 countries in 2000. • Alternatively, Croatia could reach the same outcome in less than one-third of the time by raising its growth rates by 1-1.5 percentage points and sustaining such rates for a bit more than a decade.

10. RDI Reform - 20 Years Too Late? Friendly Investment Climate Essential for RDI reform … but no excuse for delay!!!

11. Audience Peer Reviews ECA KE III … • 7 Reform Options: No One Size Fits All • Distinction Not Simple: • public and private goods • technology pull and market pull • RDIs as “helpers” and not drivers of innovation, survive by staying a step ahead of the local industry needs in Western Europe • Classification must be Differentiated based on Institution • RDIs • HEIs • Academies of Science • Private R&D firms • Looking Beyond Traditional Indicators for RDI Classification: patents, citations, and publications for benchmarking

12. Audience Peer Reviews ECA KE III… • GOCO • Conceptually attractive, but faces implementation challenges • Widely attacked as unrealistic because: • No managers to contract • Agency risks • Legal Barriers • GOGO - OK if government ensures RDI autonomy – no political interference” • GRADUALIST APPROACH • Case by case > All stakeholders to be engaged • Competition for Non-Statutory Funding • Progressive reduction of public sector funding (5-8 years) • SHOCK THERAPY • Only solution for completely unproductive RDIs > closure • Closures/ Liquidations politically and financially least feasible • INSIDER PRIVATIZATION - Distributing shares to researchers – participants silent • Just cut funding – is it enough?

13. Audience Peer Reviews ECA KE III … RISKS / OPPORTUNITIES • Concerns of losing national R&D capacity • Anti-reform lobby from RDI Directors ►delays • RDI may “crowd out” innovative firm entry ► • RDI restructuring is essential to level private-public playing field FINAL REPORT SHOULD SPELL OUT • How to establish RDI mission / metrics / expectations / autonomy • How to develop new scientific fields / RDIs • Discuss “sweeteners” in greater detail: • grant schemes for collaborative research • vs. tax incentives, • or accelerated depreciation.

14. Becoming a World Class University • World-class higher education institutions (HEI) are crucial for development, but we must consider that: • Not all HEIs need to be world-class; most HEIs can serve the purpose of addressing local skill gaps and serve as diffusion agents for knowledge and technology. • Not all countries can establish them • The Dangers of “Doing Well” > Complacency • Three necessary conditions: • Talent – Students / Teachers / Researchers • Financial resources • Autonomy and Good governance • Three potential paths: • De Novo (INSEAD, Olin); • Mergers; and • Transformation Change (Leeds)

15. Becoming a World Class University • Incentives and institutional change are critical for improved performance, but there are contextual limitations (U. of Zagreb) • Sum Greater Than Parts. Creative collaboration opportunities (ParisTech) • NUS Messages: • Universities to focus on solving tomorrow’s problems and creating tomorrow’s industries • Entrepreneurship > Teaching > Research • Attract Top Foreign Talent (Teachers & Students) • Licensing Necessary but not Sufficient • Adapt Best Practices to Domestic Conditions • Linkages with industry.

16. Identifying, Producing, and Retaining Skills The “human side” of innovation: strong correlation between skills and competitiveness. Europe (EU-27) does well in the literacy and basic skills, less well in occupational skills, and not well in “talents for the Global Knowledge Economy”. Investment in skills and human capital is critical in time of crisis to ensure robust post-crisis recovery: those countries that are ready, will experience robust recoveries. The talent challenge: Interest in science education and vocation in technology is lower in industrialized countries, where technology is readily available. Teachers play a very significant role in reversing this trend.

17. Identifying, Producing, and Retaining Skills

18. Identifying, Producing, and Retaining Skills Key Global Challenges: • Importance of Long Term Planning • We live in Exponential Times • Managing Resource Demand Growth & Climate Change Global Trends in Education: • Value-based Educational Content • Restore Interest in Math, Science, and Technology • Build Teacher’s Societal Status, Image, and Rewards

19. Quality Infrastructure Messages… • Compete on Quality, Not only on Price • National Quality Infrastructure & Legal System Critical • Important for Trade and Innovation • Compliance with Rules of Importing Country on Non-Discriminatory basis • Mutual Recognition for Trade Facilitation • EU Standards as a Driver for Reform • Technical Regulations • Inspections • Accreditation

20. Majorproblemsforthedevelopment of qualityinfrastructures Industry (Provider) State (Regulator) Driving force. Identification of needs. Weights in decision making. Sources of know-how. Usage of available people. Usage of available infrastructure. Development of Strategy Public (Consumer) Knowledge Economy Forum, VIII Fontainebleau, 1 May 2009 Dr. Hüseyin Uğur 20

21. Commercialization: From Labs to Markets • Importance of Networking for Universities • Innovation Based on Research Universities • Development of products done by industry • University-Industry do not compete, but have different but complementary roles • Sharing Risks & Rewards through “spin-offs” (university-Industry) • Demand results from “honest brokers” (TTOs, commercialization contractors, …) • Incubating the Incubators: ECA does not follow the “typical” linear model … Why? KEF IX

22. Commercialization: Not All About Money • Entrepreneurial Ecosystems • Promote Access and Diffusion • Collaborative Research • Social Networking for Commercialization • SMEs and Serial Entrepreneurs as driving force • Social Entrepreneurs and Philanthropists • National Labs as Accelerators of Innovation (US Labs) • Incentives not Mandates • “Open Innovation” Model

23. Protect Innovation Through the CrisisFINAL MESSAGE

24. VERY WARM THANKS FOR YOUR ACTIVE PARTICIPATION See You Next Year ! Please Fill Out Your Evaluation Forms