FEATURED | The Specificities of Innovation Systems in Developing Countries

FEATURED | The Specificities of Innovation Systems in Developing Countries

By GII 2015 Editorial Team

One question looms large: How can the prevailing innovation policy approaches of high-income countries be adapted to work for developing countries, if at all?

FEATURED | The Specificities of Innovation Systems in Developing Countries

To find an answer, the first step is to look at the innovation policy mixes that high-income economies have fine-tuned over the last decades. Policy makers in these countries follow an innovation system approach in which innovation—understood broadly—is the result of complex interactions among all innovation actors, policies, and institutions. They also draw on the understanding, born of experience, that converting a scientific breakthrough or an idea into a successfully commercialized innovation often involves a long journey with no guaranteed outcomes. Beyond incentivizing research, complementary measures are required to bring product, process, marketing, and organizational innovation to fruition.

Two main policy strands form the core of present innovation policy. On the one hand, there is a need to improve the framework conditions for innovation; these include the business environment, access to finance, competition, and trade openness. On the other hand, nations also need dedicated innovation policies targeting both innovation actors and the linkages among them; these include collaborative research projects, public-private partnerships, and clusters.13 High-income countries follow a set of dedicated supply- and demand-side innovation policies.This entails creating a strong human capital and research base that includes research infrastructures, sophisticated firms and markets, innovation linkages, and knowledge absorption, and that fosters innovation outputs as captured by the GII. Direct support for business R&D and innovation is provided in the form of grants, subsidies, or indirect measures such as R&D tax credits. Universities and public research organizations are funded either via across-the-board or more competitive funding mechanisms.

In addition, there is also renewed interest in demand-side measures. This interest is evident while using classic instruments such as public procurement, as well as while testing out new approaches to promote innovation specific to overcoming a key societal challenge in fields such as clean energy and health. Demand-side measures also facilitate the uptake of specific innovations (including via standards or regulations) and can foster user-led innovation. Business executives in charge of innovation, stress the importance of forward-thinking legislation to support future innovation and the related markets (e.g., for autonomous cars). They also stress the need for the international harmonization of regulations for new technologies so they can diffuse more rapidly and be commercially viable.

Another new policy development is the focus on creating an ‘innovation culture’ with businesses, students, and society at large. This is meant to spur greater entrepreneurial activity and to achieve a better public appreciation of the role of science and innovation. The design of proper metrics and evaluation strategies of policies is emphasized too. Indeed, the formulation and measurement of innovation policies is increasingly treated as a science in its own right.

Regardless of these developments, finding the right combination between demand and supply measures, and between public and private funding for innovation, remains largely a trial-and-error type of endeavor. In addition, although it is tempting to think so, a simple migration of policy mixes developed in high-income countries to developing countries is unlikely to bear fruit. Innovation policies and institutions need to be context specific, reflecting the extensive heterogeneity and varying trajectories of countries.

The heterogeneity among countries aside, broadly speaking a number of differences between developed and developing countries need to be considered:

First, evidently the framework conditions for innovation are more challenging in developing countries. Beyond macroeconomic challenges, this often manifests itself in poorer infrastructure; weaker product, capital, and labor markets; and weaker education systems. Ineffective regulatory set-ups that do not provide the proper incentives to innovation are often a problem. Developing countries also frequently face inherently dissimilar pressures—for example, high population growth and a resulting younger population, or more intense inequalities.

Second, for sheer budgetary reasons, the capacity to finance, coordinate, and evaluate a large package of innovation policies is constrained in developing countries. Although arguably all components of innovation policy dimensions seem important, tough priority-setting is required. Moreover, in the context of developing countries, the innovation policy coordination between various local, regional, and national levels of government is often even more demanding than it is in developed ones.

Third, the industrial structure of most low- and middle-income countries is usually different, with a greater reliance on agriculture, the extraction of raw materials, and too few—mostly low-value-added— manufacturing activities (e.g., food processing, textiles), as well as an increasing reliance on services industries such as creative sectors, tourism, transport, and retail activities. Micro- and small businesses play an above-average role for the broader economy and potentially for innovation too. Although frequently neglected, the informal sector often matters greatly.

Fourth, country- or sector specific exceptions aside, innovation capabilities in developing countries are typically less advanced than those in developed countries. For one, the human resource base remains comparatively weak, the brain drain abroad is high. Innovation actors and linkages between them are usually weaker; public research organizations are often the only actors engaged in research and often operate in an isolated fashion without links to the real economy, while firms tend to have a low absorptive capacity. In the formal sector, improvements in maintenance, engineering, and quality control, rather than fresh R&D investment, tend to drive innovation. Sources of learning and innovation frequently result from foreign direct investment (FDI) or technology acquisition from technologies developed abroad. Firms tend to have a low absorptive capacity and do not interact with scientific institutions or science more broadly. As noted in the report, collaborating with external partners in innovation remains an important challenge for companies.

Conclusion:

In turn, innovation under scarcity is the daily dare of dynamic clusters of small, informal firms and other actors in developing countries. As outlined by Mashelkar (a member of the GII Advisory Board) in 2012, the focus is often on innovating with limited means and with the aim of providing more affordable access of quality goods and services and improving the livelihood for poorer segments of the population.

About The Global Innovation Index (GII) 2015:

The Global Innovation Index 2015: Effective Innovation Policies for Development is the result of a collaboration between Cornell University, INSEAD, and the World Intellectual Property Organization (WIPO) as co-publishers, and their Knowledge Partners. Download This Extensive Report – LINK

Editors: Soumitra Dutta, Bruno Lanvin, and Sacha Wunsch-Vincent

Cite This Article:

Cornell University, INSEAD, and WIPO (2015): The Global Innovation Index 2015: Effective Innovation Policies for Development, Fontainebleau, Ithaca, and Geneva.

Publication Details:


This publication is not intended to reflect the views of the Member States or the WIPO Secretariat. This work is licensed under the Creative Commons Attribution Non-commercial No-Derivatives 3.0 IGO License,  ISSN 2263-3693 ISBN 978-2-9522210-8-5
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