1. Notes on innovation policy and development David C. Mowery Haas School of Business University of California, Berkeley “Innovation and Technology Day,” 2012 UNCTAD meetings, Doha, Qatar

2. Developing economies’ performance has improved since 2002 Since 2003, per capita GDP growth in low-income economies has averaged 5.1%/yr., vs. 2%/yr. in high- income industrial economies. –Faster growth has reduced extreme poverty in Africa, South Asia, Latin America. Improved performance in low-income economies reflects – Higher prices for minerals, oil, other natural-resource exports. – Growth in inward FDI from China, other sources. – Adoption of ICT-based technologies (mobile telecom, Internet) supports innovation in services. Major issues: – What are the best strategies for building on recent success? – What role for innovation policy in these strategies?

3. Key policy goal: economic “catchup” Strengthen growth through innovation and adoption of technologies from external sources. Effective inward transfer and technology adoption relies on indigenous adaptation, innovation. Post-1945 development of W. Europe, Japan, East Asian tigers, benefited from inward technology transfer & adoption. Contemporary developing economies can benefit from similar “catchup” strategies. Requires strong links with international sources of knowledge, capital, technology. Investment in physical & human capital to strengthen domestic capacity to modify & improve imported technologies.

4. Elements of “pro-catchup” innovation policy Increase public and private R&D investment, especially in nongov’t R&D performers (universities, industrial firms). – Support a diverse mix of performers of publicly funded R&D. – Include competition, evaluation in public R&D programs. Strengthen linkages with international sources of knowledge, technology. – Tap into nonresident diaspora. – Support student, scholarly exchange with foreign universities & research institutes. – Support inward foreign investment as a source of technology and competition for domestic firms. Support technology adoption by domestic firms, farms. – Public “extension services” in agriculture, services, manufacturing. Increase investment in human capital: – Primary, secondary, & post-secondary education. – Training of the employed workforce.

5. Strengthen public investment in low-income economies’ agricultural R&D Agriculture remains a major employer in low-income economies. Innovation-enabled productivity in the sector => growth in incomes and may enhance economic equality. Social returns to investments in ag. R&D and technology adoption are high. Support for innovation & technology adoption in agriculture complements export-oriented strategies (e.g., meeting phytosanitary standards in foreign markets). Public investment in ag R&D in many low-income developing economies has lagged since 1980s. Domestic R&D in agriculture can complement R&D performed in CGIAR, private industry. – Adaptation of research advances to local conditions. – May offset effects of TRIPS-related restrictions on access to results of privately funded agriculture R&D.

6. Conclusion “Innovation policy” includes technology adoption & skills improvement, as well as innovation. Goals of policy should include effective inward transfer and adoption of knowledge and technology. Stronger links with external sources of knowledge & technology, as well as improved domestic “absorptive capacity,” are key. Market-based reforms are compatible with and can strengthen effectiveness of public investment in R&D, human capital.