Transcript סקטור ה- "היי טק" וצמיחת המשק

Government Support for
Commercial Innovation
Knowledge Economy Forum V
Prague, 28 March 2006
Manuel Trajtenberg
Tel Aviv University, NBER, CEPR
1
Introduction
R&D Policies: Prospects and Perils
We take it for granted that Governments should
support Innovation and R&D, ride the wave of
the Knowledge Economy.
• “Official blessing” of such view in the Lisbon
agenda: goal of 3% R&D/GDP
• “Bandwagon effect” in the globalization of
R&D;
• Rush to mimic policies of presumed success
stories (e.g. Finland, Israel, etc.),
• Rush to attract/set-up Venture Capital funds, etc.
2
Intro - continued
In order to “do it right”, need to understand the
fundamentals:
• What is exactly the economic rationale for
government intervention in the realm of Innovation
and R&D? =>
Appropriate policies should be derived from it!
• How that varies across countries, given the
tremendous heterogeneity in their institutions,
stages of development, availability of appropriate
inputs, etc.?
Not such as a thing as “one size fits all”!
3
Economic Growth and Innovation
The historical evidence:
Sustained growth always means widespread
innovation throughout the economy, not “more
of the same”.
Innovation takes many forms:
• New/improved products and processes (“new”
for the country/sector/firm);
• Some “informal” (ingenuity at plant floor), some
formal, i.e. patented innovations from R&D labs.
• Institutional, organizational innovations.
4
Growth and Innovation – cont. 1
Innovation entails a variety of processes:
• Far reaching reallocation of resources (hence lots
of entry and exit),
• Upgrading the composition of skills and capital;
climbing-up the tech ladder;
• Changes in patters of trade.
E.g. see UK, US in 19th century; lately S. Korea,
China, India, Ireland, Israel, etc.
=>
In every country
continuous innovation  sustained growth!
5
Growth and Innovation – cont. 2
•
Historically, the cumulative effect of widely
distributed “small” improvements as significant for
growth as the impact of “major” innovations.
• Innovations entail interdependencies, necessitating
complementary investments and innovations to reap
their full benefits.
• Relevant “types” of innovation varies with stages of
development, institutional setting, etc.
=>
Growth-enhancing Innovation policies:
not only supporting formal R&D, strengthening IPR,
not only in the “high tech” sectors.
6
The Economic Rationale for Government
Support of Innovation and R&D
R&D
K
TFP
Growth
Endogenous growth theory: economic
forces shaping R&D hence TFP
Arrow (1962): Social returns >> private
•
•
•
Spillovers: Partial appropriability
Information asymmetries: funding gap
High risk, lumpiness, coordination
failures
Solow (1956): Total Factor Productivity
(TFP) key to growth
Too little innovation => need Government
7
intervention (e.g. subsidize R&D)
The Rationale for Government Support
continued
So, clear-cut case for Government intervention to
support innovation, i.e.
• Even in a well-functioning market economy,
there typically will be underinvestment in
Innovation and R&D => Government support
• However, many economies not “there” yet, need
Government action to create institutional
framework conducive to innovation.
• Sequencing is important!
8
Spillovers: the basics
1. Innovations generate positive externalities (e.g. new
ideas, new K) that benefit other would-be inventors;
2. Innovations confer benefits to purchasers of new
products (consumers and producers) that often
exceed sustainable increases in price;
=>
social returns from innovations >> private returns
Spillovers channels:
• local interactions, information diffusion, mobility,
• International trade, FDI
9
Broadening the Scope of Spillovers,
hence of policy
• A single innovator may break the mold of stagnant,
concentrated markets, and trigger a process of
“spiraling innovations” – hence extra benefits.
• “Demonstration effects” in diffusion: Early adopters
positively impact later adopters: network
externalities, informational effects, emulation, etc.
Policy implications:
encourage first-time innovators in stagnant markets;
support early adopters, particularly of technologies
that enhance productivity in wide range of sectors.
10
More on spillovers and “demonstration effects”:
rent-creation vs. rent-seeking norms
• J. Mokyr - precondition for Industrial Revolution (thus
for growth): shift from rent-seeking to rent-creation,
encouraged by the Enlightenment.
• Shift yet to occur in some emerging economies: is it
more attractive for entrepreneurs to search for
innovative ways to further extract rents, or to develop
new technologies?
Policy implications:
change cost-benefit of rent-seeking versus rent-creation,
help market pioneers; need the local “Thomas
Edison”, the local “Steven Jobs” to emulate. 11
Who really benefits from spillover flows in
the global economy?
• In very large economies such as the USA, spillovers
benefit mainly the local economy:
- Large: high Prob. that other local agents will benefit;
- Relatively low [Ex+Im]/GDP: small risk of spillovers
slipping out.
• In “small” open economies (like ECA countries) :
- Fewer potential local recipients;
- Spillovers may easily spill out, benefiting foreign
firms and consumers rather than local economy;
- But may be recipient of trade-mediated spillovers
=> need “absorptive capacity”
12
Local vs. Global Spillovers
some policy implications
• Just promoting local innovation may not result in faster
economy-wide growth.
• Israel as case in point: extremely successful innovative
ICT sector, but slow growth in rest of the economy.
Hence innovation policies should aim at increasing
R&D in a way that,
• incentivizes spillovers inflows rather than outflows;
• develops “absorptive capacity”;
None of it can be taken for granted, certainly not in
emerging countries.
13
Innovation and Growth in the context of
“General Purpose Technologies” (GPTs)
GPTs as “engines of growth”, e.g. the steam
engine, electricity, ICTs:
• GPTs drive growth by spreading over a wide
range of sectors, prompting them to innovate as
well (i.e. “innovational complementarities”).
• Progress in the adopting sectors feeds back into
the GPT sector => further advances in the GPT
itself, feeding a positive, self-sustained loop.
14
GPTs continued
• Growth in the US, 1995-2000, due not just to “High
Tech,” but to WalMart! TFP growth in retailing via
massive adoption of ICT-based methods.
• The GPT sector: small, cannot pull on its own the
whole economy: if the rest of the economy fails to
adopt the GPT, or to make complementary
innovations, growth will not materialize.
Policy: focus not just on the prevailing GPT (such as
ICT now), but on the potential “Walmarts”…
15
Guiding principles for growth
enhancing innovation policies
1. Innovation should be widely distributed across
sectors, and types of innovations.
2. Bottom up policies, not top down: provide enabling
conditions and incentives => innovation should
spring from widening cohorts of would-be
entrepreneurs, not from gov labs or bureaucrats...
3. Alter the payoffs between innovations aim at rent
creation versus ingenuity in rent extraction.
4. Main policy levers:
skills, incentives, information, finance
16
Policy levers: (i) Supply Skills
Wide spectrum of skills needed for innovationbased growth strategy, acquired via formal
education, training, learning by doing.
Two-pronged strategy:
• Supply broad-based, up-to-date skills, including
math, ICT, English, management; upgrade often.
• Ensure responsiveness (endogeneity) of academic
institutions supplying vocational and advanced
skills (Rosenberg: “Universities as Endogenous Institutions”).
17
Policy levers: (ii) Incentives
Crucial attractor: Expectation of large rewards to
innovation, given risks, costs.
• Traditional factor: appropriability, IPR.
• Would-be innovators should have a stake in the firm,
prospects of promotion, outward mobility.
• Low “barriers to innovation” within markets
(officially sanctioned regulations, tacit collusion)
Policies promoting,
inclusion (of potential innovators),
openness (of markets).
18
Policy levers:
(iii) Access to Information
•
Necessary condition for innovation: access to
K, info about technology, about markets
(substitutes, market size, prices).
• Innovation as “recombination of ideas”, hence
wide knowledge base.
• Policy:
– Internet access, computer and search skills
– Openness and competition in media,
– Encourage knowledge intermediaries,
– Transparency in businesses.
19
Policy levers:
(iv) Availability of Finance for Innovation
• Generalized problem, given information
asymmetries, lack of collateral, lack of screening
expertise; more acute in emerging economies!
• Need “angel investors”, internal finance, VCs, etc.
Not much available.
=>
• Preeminent government role: provide funding for
innovation, many channels possible, e.g. matching
grants, conditional loans, etc.
• Lots of international experience – tap it!
20
Further policy issues
for ECA countries
• Legacy in many ECA countries: associate
innovation with centralized research institutions,
disconnected from market forces.
• Need to metamorphose them into commercial
R&D labs – not easy!
• Think foremost of incentives to innovate, of
demand stemming from open markets, and not
just of supply of researchers…
21
But, is Innovation Policy a viable
option for ECA economies, really?
• Any country can do it, regardless of size,
location, and stage of development, but
policies should reflect all that.
• Each and all countries should do it in order
to embark in long term growth,
• There is no alternative but to do it!
22