Science, Technology and
Innovation (STI), Growth
and Development
Michael Lim
Policy Review Section
Science, Technology and ICT Branch
UNCTAD-DTL
P166 short course on STI and development
12 December 2011
Geneva
Outline
•
•
•
•
•
2
Technology and economic growth
Technology and innovation
The importance of STI
Innovation and innovation systems
Conclusions
The Global Distribution of Knowledge
(from UNCTAD LDCR 2007)
3
The Global Distribution of Poverty
(from UNCTAD LDCR 2007)
4
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?
5
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)
unexplained
Kp=f(Kpt, It)
Kh=f(Kht, Iht)
L=f(Lt, grL)
6
ie T=f(?) T is
It is new investment in physical capital
Iht new investment in education, training and health
grL is population growth
(t is time)
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.
7
Technology and economic growth:
historical viewpoints (3)
• Neoclassical: Technology is exogenous (unexplained), but drives
productivity of labour and capital.
• Adam Smith (1770s): labour specialization and innovative
production processes increase productivity.
• Karl Marx (1850s): technology-driven economy and social
relations.
• Friedrich List (1880s): importance of national policy frameworks,
government coordination of learning, knowledge, technology to promote
innovation.
• Joseph Schumpeter (1930s): creative destruction, competition
and new firm entry (entrepreneurship) create innovation; types of
innovation.
• Endogenous growth theory: increasing returns from knowledge
accumulation through development of technology, human capital
and R&D (Paul Romer).
• Evolutionary economics: learning required for technological
progress, cumulative learning, path dependency etc.
• Innovations systems theory: technology and innovation are
8 endogenous, depend on complex, dynamic systems (Chris
Freeman, B.A. Lundvall, Richard Nelson 1980s/90s).
Innovative Capabilities and Income
(from UNCTAD LDCR 2007)
Real per capita income and innovative capabilities, 2001
9
The technology frontier is dynamic
t3
t2
t1
10
Why STI is important
•
•
11
Building strong STI capabilities, accessing foreign technologies and
building strong national systems of innovation are important for
economic growth and development, social welfare and addressing
environmental challenges.
STI applications:
-improving productivity in manufacturing, agriculture and services
-increasing value added locally
-diversifying production into knowledge-intensive activities
-mitigating/adapting to climate change
-developing new energy sources (renewable energy technologies
RETs)
-building good infrastructure
-conserving water in agriculture
-improving public services (health, education)
-addressing disease epidemics
-organizing large and mega-cities (smart urban planning)
-early warning systems for natural disasters (tsunamis, hurricanes)
-adapting buildings for earthquake prone zones
-slowing desertification etc.
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.
• SET, S&T, STEM.
12
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
and 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.
• Policy learning by STI policymakers also important.
13
What is technology?
• Technology - knowledge applied to the
production of goods or services or solving
practical problems.
• Different forms: machinery, processes and
knowledge
- physical machinery
-production processes
-software
-codified and tacit knowledge
• Knowledge – the theoretical or practical
understanding of a subject.
14
What is innovation?
• New to world: the introduction for the first time by an
organization (or person) of a novel product or process that is
new to the world.
• New to the firm/industry: 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: U.S. Patent Law: 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, as
distinguished from ordinary mechanical skill or craftsmanship.
• Innovation vs invention
15
Types of innovation
• All along the production value chain: design,
production, distribution and marketing.
• Technological (related to the introduction of new
technologies) or non-technological (organizational,
managerial or institutional).
• Based on formal training and R&D or based on
informal learning, trial and error, use and experience
• Size of impact:
-Incremental/marginal (through small improvements)
-radical (through major breakthroughs)
-revolutionary (a fundamentally important new
technology is created).
16
What drives innovation?
• Two basic conceptual approaches:
• Linear approaches
• The systems approach
17
Linear models of innovation
18
National systems of innovation
(source: Arnold and Bell (2001))
Framework conditions
▪ Financial environment
▪ Taxation and incentives
▪ Propensity for innovation and entrepreneurship
▪ Trust
▪ Mobility
▪ Education, Literacy
Demand
▪ Consumers (final demand)
▪ Producers (intermediate demand)
Business
system
▪ Companies
▪ Farms
▪ Healthcare, etc
Education and
research
system
Intermediate
Organizations
▪ Research institutes
▪ Brokers, etc
▪ Professional
education and
training
▪ Higher
education and
research
▪ Public sector
research
Infrastructure
▪ Banking, venture
capital
19
▪ IPR and
information
system
▪ Innovation and
business
support system
▪ Standards
and
norms
National systems of innovation
(source: OECD (1999))
20
Sectoral IS: an agricultural innovation system
(from Spielman and Birner (2008), adapted from Arnold and Bell (2001)).
21
Macroeconomic &
International Regulatory
Environment
Education System &
Training
Regional innovations systems
Agricultural Knowledge Generation,
Diffusion and Use
Firms and
Networks
Research &
standard
Setting
Bodies
FARMERS
Science
suppliers
Supporting
Institutions
Industry, other
supply led systems & value chains
Agricultural Innovation Systems
Physical
Infrastructure
Global Innovation networks
National Innovation System
Product Market
Conditions
Agricultural
Innovation Capacity
Sector Performance Growth,
Jobs, Competitiveness
22
Source: UNCTAD Technology and Innovation Report 2010, Adapted from OECD, Managing National
Innovation Systems, 1999
Farming & Soil
Conditions
Some central tenets of evolutionary
economics and the IS framework
•
•
•
•
•
•
•
•
•
•
•
•
23
knowledge important (not just information)
learning and decisions are made under high levels of uncertainty
focus more on production than consumption
based on dynamic comparative advantage, not static comparative
advantage
production patterns and export specialization matter a lot
government and market both have a role; activist state needed –
technology markets highly imperfect – social returns higher than private
ones)
financial markets often work poorly in financing innovation
market failures occur but also systemic failures, state intervention is to
correct systemic failures (and market failures)
markets do not find an equilibrium
firms innovate in a system (and are not atomistic and independent)
institutions (formal and informal) important for collaboration and
learning as well as contract enforcement
uneven development (not convergence) among countries probable
without activist state promoting learning and innovation
Problems with IS framework
• The IS framework is useful but imperfect.
• It is a complex tool to use because the systems are
complex and dynamic.
• There is much conceptual work on IS, but limited
empirical work on building IS.
• The boundaries of an IS are not completely clear; IS
are very broad.
• It is not prescriptive in nature, so inadequate for
detailed guidance with policy prescriptions.
• It remains a useful but possibly inadequate
framework used on its own.
24
How to build innovation systems?
• Strong innovation systems may develop only very
slowly.
• Developing countries often have emerging,
incomplete, weak innovation systems.
• NSI are context specific; have historical roots;
embedded in local social and institutional setting; no
single, ideal system for all countries (no one-size-fitsall).
• National policies can help accelerate the process.
• Problem: How to build them is not well understood;
no blueprint.
25
Conclusions
• Strong STI capabilities, human capital,
access to technologies (and absorption), and
effective innovation systems are important for
sustainable and inclusive growth and
development, improving social welfare,
solving environmental problems.
• Policymakers should think about how to build
each. How can policies make a difference?
26
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 solve all our problems?
• Does technology create new problems?
27
28