Transcript Slides_-_Country_Report_-_Brazil

The Brazilian Innovation System
and the BRICS project
José Eduardo Cassiolato
Economics Institute of Federal University of Rio
de Janeiro
The Evolution of the Brazilian National
Innovation System

The Brazilian Innovation System from the 1950s
to the mid 1980s –
– Institutional innovations
– Partial successes in some sectoral innovation systems

The Brazilian NIS from the late 1980s and 1990s
– Changes in the policy regime
– Downgrading of some innovation systems

Challenges

Brazil and the BRICS project
From the 50s to the 70s
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50s -CNPq, Petrobrás and Airspace
(CTA)
60s – Funtec – FNDCT and FINEP
(funding the infrastructure)
70s – Embrapa, Energy, Telecom and
(later) IT
From a S&T&I point of view the model was
based on a:
Rapidly upgrading of the scientific infrastructure
2. Massive (and disorganized) import of technology
(and capital)
3. Attracting foreign capital was perceived as a quick
and easier way to channel modern technology into
the economy
Important successes:
 EMBRAPA & agro-industrial technology
 strategic sectors: infrastructure, air space, oil, energy
and telecom
Frustrated attempts:
 auto industry (Fábrica Nacional de Motores was
created in the late 1950s).
1.
Structural Changes and Industrialization - selected
countries, 1965-1980
The Brazilian NIS in 1990s
1 – the crisis - development process subjected to an
exchange-based economic system
3 – structural changes
3 - downgrading of some innovation systems: disorganized
privatisation of infrastructure (particularly telecom)
4 – some remarking exceptions
agro-industrial systems (the role of EMBRAPA)
aircraft system (EMBRAER)
oil extraction and refining (Petrobrás)
other exceptions (services, for ex.)
5 – the evolution of infrastructure
6 – the macro policy environment
Selected developing countries: share in world
exports and GDP growth, 1980-2000
Fragility of the Brazilian NIS
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weak competitive performance with significant
trade fragilities in all sectors of high added value
and high technological content
widespread loss of national ownership in many
sectors, weakness and reduced size of the
remaining Brazilian business groups
persistent financial vulnerability of Brazilian-owned
businesses resulting from very high costs of capital
and inexistence of long-term financing
mechanisms.
S&T infrastructure in Brazil evolved positively in the last


decades
Human Resources
Research activities, (expanded significantly):
– in 2002 there were 15,158 research groups with approximately
59 thousand researchers working in 268 research institutions
(the vast majority public universities and research institutes).

Brazilian scientific
augmented:
production
has
significantly
– in 1991, occupied the 28º position in terms of production of
indexed scientific and technical articles, got the 17ª place
2000
– The average of articles originated in Brazil published in 198892 (3,166 or 0.6% of world production) increased four-fold in
1996-2000 (7,836 or 1.12% of world production).

Technological research institutes
Brazil: scientific articles published in indexed international scientific
periodicals in the ISI, 1981-2002
Brazil/ world (%)
2
1
Brazil/ world (%)
0,5
0
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
%
1,5
Year
However, instability in public support for
the area
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Throughout the 1980s and during the 1990s, the fiscal crisis
of the state and a lack of definition of what development
strategy to pursue give contours to this pattern of instability
Total expenditure of FUNTEC (the most important S&T fund)
fell from US$ 1.2 billion (1970-1979) to US$ 754.32 million
(1980-1989)
After the stabilization program of 1994 public budgetary
resources to S&T slightly increased in local currency (from
R$ 3.1 billion to RS$ 3.3 billion in 1996), fell significantly till
2000 (when they amounted to R$ 2.8 billion), slightly
recovering from 2001 with the implementation of the new
sectoral funds
Brazil - investment in R&D and S&T as %
of GDP – 1996 - 2004
1,6
1,4
1,2
%
1
0,8
Federal R&D
0,6
Federal S&T
0,4
Total S&T
0,2
0
1996
1997
1998
1999
2000
Source: Science and Technology Ministry and Central Bank
2001
2002
2003
2004
PINTEC (the Brazilian innovation survey 2000 and 2003)
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Important information for
manufacturing sector
3rd survey will include some services
Some results
1 – Brazilian manufacturing firms are
relatively less innovators than most
countries
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The innovation rate (percentage of firms that
introduced in the market new or improved
products and/or processes in the 3 years
prior to the survey) of Brazilian firms were
31% in 2000
This compares to innovation rates above 60%
in countries such as Sweden, Austria,
Canada, Denmark, Switzerland, Ireland,
Holand an Germany
Innovation in the Brazilian industry – 2000 2003
Extracting and
Manufacturing
activities
Total
Innov. Expend. Over sales
Internal R&D
Innovative activities
activities
1998-2000 2001-2003
2000
2003
2000
2003
31,5
33,3
3,8
2,5
0,64
0,53
Innovation rate
Source: Brazilian Technological Innovation Research (PINTEC/IBGE)
Increase in the innovation rate, although
accompanied by a reduction in the investment in
innovative activities and in the internal R&D activities as
percentage of sales
Low innovation rate comparative to other countries

Brazil - Innovation rate, % of sales in innovative activities and in
internal R&D, by firm size – 2000 and 2003
2000
Firm size
Innovation
rate
% of sales
% of sales
in innovative
in internal
activities
Total
From
From
From
From
10 to 49
50 to 99
100 to 249
250 to 499
With 500 and more
2003
Innovation
rate
% of sales
in innovative
R&D
activities
R&D
31,5
26,6
43
49,3
56,8
3,84
4,1
3,97
4,27
3,27
0,64
0,39
0,43
0,43
0,44
33,3
31,1
34,9
43,8
48
2,46
2,81
2,53
1,91
1,79
0,53
0,37
0,27
0,22
0,26
75,7
3,83
0,77
72,5
2,62
0,68
Source: Brazilian Technological Innovation Research (PINTEC/IBGE)

Only small firms increase innovation rate
Low
innovation rate of small firms comparative to other
countries (Netherlands, Germany and Denmark –
between 44% and 51% in the period 1998-2000)
Decrease in expenditures (innovation and R&D) in all
class sizes

% of sales
in internal
Manufacturing sector - Share of R&D
expenditure over sales, Brazil (2000)
OECD (1996)
2 –Innovation expenditures of Brazilian manufacturing
firms are relatively high but decreased
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PINTEC’s data suggest that Brazilian
manufacturing firms spent in 2000 3.7% of
sales in innovation.
This is equivalent to the average of the
European Union and higher than 11 OECD
countries, including the U.K (3.2 %), Italy
(2.6 %) and Australia (1.9%).
In 2003 – down to 2.4% (the effect of crisis)
Innovation Expenditures/Sales (%)
Spain
Italy
3 – Innovation expenditure of Brazilian manufacturing
firms are concentrated on acquisition of capital goods
while in most OECD countries expenditures are
concentrated on R&D
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More than 50% of innovation expenditures of
Brazilian manufacturing firms refer to the
acquisition of tangibles (basically
machinery).
In most OECD countries this share is between
10 and 20% .
In those countries internal R&D is responsible
for the majority of innovation expenditures
(30 to 60% of total innovation expenditures),
while in Brazil this share is below 20%.
Distribution of expenditures in innovative
activities by selected countries - 2000
100
11
90
29
31
37
80
51
70
6
%
60
50
30
20
10
23,6
Training, etc
Other knowledge
31
41
7
8
52,2
34
2,8
49,7
6
14
Internal R&D
2,9
4
15
4
11
12
6
6
21
3
11
Germany
Italy
Spain
Netherlands
Belgium
Portugal
0
Machinery and equipment
External R&D
14
28
2
26,4
8
69
50
2
51
60
10
4
40
7
1,9
Denmark
16,7
21,8
Brazil 2000
Brazil 2003
Source: Applied Economics Research Institute, 2005 (IPEA) and Brazilian Technological
Innovation Research (PINTEC/IBGE)
The innovative pattern of the Brazilian industry differs
from most of the developed countries: there is a high
concentration in machinary and equipment acquisition
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Structure of expenditures in innovative
activities in the Brazilian industry
60
50
40
%
2000
30
2003
20
10
0
Machine and
Equipment
acquisition
Internal R&D
activities
Industrial
Introduction of Other external
project and
technological
know ledge
other technical innovation in the acquisition
preparations
market
External R&D
acquisition
Training
Source: Brazilian Technological Innovation Research (PINTEC/IBGE)
Very high participation of machinery and equipment
acquisition on the total expenditures in innovation
activities
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4– Innovative firms cooperate very little
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Only 11% in 2000; down to 3.8% in 2003
Cooperation university/industry very low in
manufacturing .
Higher in agro-business and services.
Brazil – Manufacturing Sector - Share of firms
with cooperative relations on total innovative
firms
Number of employees
Share of firms with cooperative relations over total firms that innovated
5 - Innovative firms prefer other forms of protection
than patents
%of innovat ive f irms t hat used IP
25,00
20,00
15,00
10,00
5,00
0,00
Pat ent s
Trademarks
Design
Indust rial Secrecy
Lead Time
6 - Regional Imbalance of Private and Public
Expenditures
Regional Distribution of Innovation Expenditures
2%
1%
7%
1%
3%
4%
1%
2%
7%
4%
1%
7%
8%
52%
Amazonas
Pernambuco
Espírito Santo
Paraná
Goiás
Pará
Bahia
Rio de Janeiro
Santa Catarina
Outros
Ceará
Minas Gerais
São Paulo
Rio Grande do Sul
Distribution of state R&D
expenditures by states
Other
7%
Paraná
10%
Bahia
11%
Maranhão
2%
Pernambuco
2%
Minas Gerais
2%
Rio de Janeiro
9%
São Paulo
57%
Source: Science and Technology Ministry
High concentration of the R&D expenditures in São
Paulo
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Old Questions


Firms do not perform R&D
Very few (formal) linkages between
firms and R&D infrastructure
An old question – the role of TNC
subsidiaries
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Although inflows of foreign capital in the 1990s
are approximately 13 times of what was
observed during the 1970s, economic growth
has been 50% lower than the what was
obtained in that period.
FDI in the 1990s
– directed to merger and acquisition of existing
firms rather than green field investment.
– market seeking forms
Although changes of the 1990s explicitly
attempted to foster increase in innovation and
R&D expenditures by subsidiaries of MNCs, the
net result has been the opposite
Most innovative firms (that differentiate products)
Structure of innovation expenditures (% of sales) 2000
9
8
7
6
5
4
Domestic
3
Transnational
2
1
0
Internal R&D
activities
External R&D
acquisition
Other
knowledge
acquisition
Machine and
equipment
acquisition
Training
Source: Applied Economics Research Institute, 2005 (IPEA)
MNC subsidiaries concentrate expenditures on
machinery and equipment acquisition
 Domestic firms have a larger participation of internal
R&D activities in the total innovative activities

BRICS - R&D as % of Sales by Subsidiaries of US MNCs - 1990 2003
1,8
1,6
1,4
R&D/Sales
1,2
Russia
Brazil
South Africa
China
India
1
0,8
0,6
0,4
0,2
0
1990
1991
1992
1993
1994
1995
1996
1997
Y ear
1998
1999
2000
2001
2002
2003
Brazil X Europe
Portugal
Spain
France
UNited Kingdom
Belgium
Germany
Poland
Czech Republic
Austria
Switzerland
Italy
Population=185
million
The Challenges
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
Macro-financial autonomy to Develop
Innovation and Competitiveness
Cope with diversity – the regional and local
dimension
– Reducing regional differences
– Support local innovation systems
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Policy for innovation systems
– Important positive changes recently but needs:
• Changes from an emphasis on firms and organizations
to a systemic approach
• Support internationalization of big local firms
• Need to increase R&D by local firms (financing)

Management capability on government and
organizations (firms, universities, etc)
The Brazilian BRICS research
project
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RedeSist - network of research organizations
Partnership with FINEP- Ministry of Science and
Technology
Support from other government agencies
– Already engaged – Ministry of Interior, IBGE, FioCruz and
Inmetro
– To be engaged – Ministry of Planning, other agencies of the
Ministry of Science and Technology, Ministry of Foreign
Affairs, Ministry of Industrial Development and others
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
Private organizations – IEDI
A BRICS Seminar in Rio (late 2006/early 2007)
The Brazilian proposal for the BRICS project
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What are the main features, weaknesses, strengths and
opportunities of the BSIs?
How adequate, embedded and sustainable
(environmentally, economically, socially and politically) is
the BSI?
What areas of the BSIs present interesting field for
comparative analysis with the IS of other BRICSs?
What sort of conceptual and empirical knowledge have we
accumulated and could be useful in a BRICS project?
General Themes - NIS
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Innovation, finance and funding
The macroeconomic regime and the NIS
Industrial dynamics and innovation
systems
Transnational corporations and NIS
Technological strategies of BRICS
multinational firms
Official Statistics and Innovation
Indicators
General Themes - NIS
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Regional imbalances of the NIS
IS and Environmental industry and services
The role of metrology and standards in the NIS
Intelectual property rights and the NIS
The role of education in the NIS
Level of informality and the NIS
Policies for SMEs in (local) innovation systems
Local (indigenous) knowledge and the NIS
Sectoral/Local IS
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Fossil fuels IS and Policy
Telecommunications innovation systems
Public Health IS
Agro-industrial IS - Sugar Cane-Alcohol
Film industry
Software industry
Creative industries
Tourism
Other topics on local systems
already studied by RedeSist
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A methodology to study local innovation systems
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Date base of more than 3000 SMEs
Indicators of innovation, cooperation and learning
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Activities
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–
–
–
–
–
–
Clothing
Shoes
Mining
Airspace
Auto
Agro-industry (basic food, Amazon fruits, wine, etc.)
Brazilian S&T expenditures
(In current US$ millions)
2000
614128,43
2001
607293,18
2002
557107,74
2003
441369,9
2004
600707,61
8788,03
1,43
8874,01
1,46
8016,8
1,44
6086,16
1,38
8240,4
1,37
Federal Government
Investments in S&T
as % of the GDP
3247,77
0,53
3206,9
0,53
2716,69
0,49
2107,15
0,48
2976,84
0,5
State government
Investments in S&T
as % of the GDP
1592,57
0,26
1665,28
0,27
1437,56
0,26
1051,02
0,24
1387,64
0,23
Private Sector
Investments in S&T
as % of the GDP
3947,69
0,64
4001,82
0,66
3862,51
0,69
2927,99
0,66
3875,89
0,65
GDP
Total
Investments in S&T
as % of the GDP
Conversion BC of Brazil
Source: Science and Technology Ministry and Central Bank