1. Does Innovation and Technology Policy Pay-off? Evidence from Turkey
Erol Taymaz
Department of Economics
Middle East Technical University
Ankara Turkey
Knowledge Economy Forum VIII
INSEAD, Fontainebleau, France  April 28-May 1, 2009

2. Outline Background: Turkish economy since 1980
Innovation and technology policy in Turkey
R&D in Turkish manufacturing
Effects of R&D support programs
Economic crisis in 2008
Policy implications

3. Relative GDP per capital

4. Relative productivity (hour worked)

5. Economic policies 1960-1980: Planned development
Import substitution industrialization
Indicative planning
: Export-oriented “growth”
Export boom, based on real devaluation, low wages, and export subsidies
Trade liberalization
: Boom-and-bust cycles
1994, 1999 and 2001 crises
: Rapid growth

6. Innovation and technology policy
: Planned development
1960: State Planning Organization
1963: Scientific and Technical Research Council of Turkey
: Export-oriented “growth”
1980: “Turkish Science Policy: ”
1989: Supreme Council for Science and Technology
: Boom-and-bust cycles
: Technology Development Project – Industrial Technology Project
1993: “Turkish Science and Technology Policy: ”
1996: Seventh 5-Year Development Plan ( )
: Rapid growth in GDP and R&D
2004: Vision 2023

7. Milestones Policy commitment Policy conception Policy tools
Supreme Council of Science and Technology
Policy conception
Establishing a well-functioning National System of Innovation
Policy tools
R&D support programs
TTGV, R&D loans (1992)
TUBITAK, R&D grants (1995)

8. Milestones Institutional setup Public R&D institutions Universities
Turkish Patent Institute
Turkish Accreditation Agency
National Metrology Institute
Competition Authority
Innovation Relay Centers
Technoparks
etc

9. National system of innovation

10. National system of innovation

11. Policies in

12. Effects of R&D support programs
More R&D
Additionality, competitive pressures
Better R&D
Performance (productivity and growth)

13. R&D/GDP ratio

14. Number of R&D personnel

15. R&D expenditures by performer

16. R&D support

17. Methodology Panel-data econometrics Propensity matching estimates
Sample selection models
Propensity matching estimates
Difference-in-difference estimators
Taymaz, E. and Ucdogruk, Y. (2009), “Overcoming the Double Hurdles to Investing in Technology: R&D Activities of Small Firms in Developing Countries”, Small Business Economics (forthcoming).
Ozcelik, E. and Taymaz, E. (2008), “R&D Support Programs in Developing Countries: The Turkish Experience”, Research Policy (37):

18. Data sources Annual Survey of Manufacturing Industries R&D Surveys
10+
About 10,000 establishments each year
R&D Surveys
All R&D performers
About 300 firms each year
TTGV and TIDEB clients
All TTGV and TIDEB clients

19. Effects of R&D support programs
Large firms are more likely to conduct R&D.
Although SMEs are less likely to conduct R&D, R&D intensity is higher in small than large firms.
Technology transfer is likely to be a complementary activity for in-house R&D for large firms.

20. Effects of R&D support programs
R&D support has a strong effect in raising R&D intensity of R&D performers.
The effect of R&D support is even stronger for small firms.
R&D support has a positive impact on the employment of R&D personnel (no wage effect).

21. Effects of R&D support programs
When the market share of R&D support recipients increase, other firms (competitors) tend to increase their R&D intensity as well.
R&D performers are more productive.
R&D support has a positive impact on R&D in Turkish manufacturing (more R&D).
R&D support has a positive impact on the way firms conduct R&D (better R&D).

22. Effects of R&D support programs
The case of Arçelik
Leading consumer durables producer in Turkey
Established in 1955
Net sales in 2008: 3,574 million €
Exports: 50 % of sales
Number of employees in 2008: 18,000
Leading innovative company
101th firm in the world in patent applications (2007)
Received 10 % of all patents granted in Turkey
Established its R&D center in 1991
Received R&D loans from TTGV since 1992

23. Strength and weaknesses
Strengths
Institutional setup
Diverse set of R&D supports
Public R&D and universities
Weaknesses
Lack of a long-term, coherent, systematic vision
Lack of coordination between policy organizations
Lack of policy learning
Too much emphasis on “supply-side” policies
No accumulation of technological capabilities

24. Economic crises in Turkey

25. Economic crises in Turkey

26. Economic crises in Turkey

27. Economic crisis in 2008 Measures
Reductions in tax rates (value added tax and special consumption tax – motor vehicles)
Reductions in labor cost (temporary work support, deductions in social security contributions)
Incentives for “clustering” for textiles
Short term employment in the public sector

28. Policy conclusions Does Innovation and Technology Policy Pay-off?
Could it be more effective?

29. Thanks for listening…