Using innovation indicators to measure effectiveness of innovation policies Empirical Evidence from

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Using innovation indicators to measure
effectiveness of innovation policiesEmpirical
Evidence from Five Type 1 Developing Countries

• Dr Sunil Mani
• United Nations University/Institute for New
  Technologies
• Keizer Karelplein 19
• 6211 TC Maastricht
• The Netherlands
• E-mail Mani_at_intech.unu.edu

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Outline

• The Context
• Renewed debate on innovation policies
• Content of Innovation policies
• Towards a taxonomy of developing countries
  according to their potential for creating new
  technologies
• Measuring policy outcomes- Three conventional
  indicators
• Limitations of the conventional approach
• A more systematic approach towards innovation
  indicators

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The Context

• Statistically significant reduction in Business
  Enterprise RD and the complementary role of the
  government investments in RD
• Lack of systematic evidence for globalisation of
  corporate innovations
• Growing imperfections in the market for
  disembodied technology transactions and
• Lack of systematic evidence on positive
  technology spillovers to host firms from the
  operation of MNCs

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Statistically significant reductions in business
enterprise RD
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Reduction in government financing of private
sector RD
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Complementarity between government investments in
RD and private sector investments in RD
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Lack of evidence of globalisation of corporate
innovations during the 1990s
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Growing imperfections in the market for
disembodied technology- Evidence i
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Growing imperfections in the market for
disembodied technology- Evidence ii
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Renewed debate on innovation policiesThe
existence of Spillover gaps
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Renewed debate on the need for clearly
articulated innovation policies

• According to World Development Report 1998 (WDR)
  in addition to taking advantage of the large
  global stock of knowledge, the developing
  countries should develop the capability to create
  knowledge at home. It also acknowledges that
  'some types of knowledge must be built from the
  ground up'. This capability to create knowledge
  at home must encompass not only strategies to
  develop knowledge locally but also policies and
  mechanisms that will eventually enhance the
  capability of the nation to absorb knowledge.
  Together these would constitute public innovation
  policies in the developing-country context.
  However, the WDR itself does not discuss this in
  any detail.
• Further the recent Human Development Report 2001
  of the UNDP also states that the market is a
  powerful engine of technological progress, but it
  is not powerful enough to create and diffuse
  technologies needed to eradicate poverty. Even in
  the network age, domestic policy still matters.
  All the countries, even the poorest, need to
  implement policies that encourage innovation,
  access and the development of advanced skills
• Most developing countries do not have a policy on
  innovation, as it is generally believed that
  developing countries do not engage in any
  innovative effort at all. At best they are
  expected to undertake incremental innovations,
  which are basically the adaptation of imported
  technologies to local conditions. But the recent
  growth experience of some of the developing
  countries and especially those from East Asia
  shows that they have become generators of new
  technologies.

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Content of innovation policies

• The basic rationale behind public innovation
  policies is to combat private underinvestment in
  RD. Following Leyden and Link (1992), the scope
  of public innovation policies can be divided
  into
• the creation and maintenance of a legal
  environment conducive to private sector
  investment in innovative activities. This is
  created by legal measures which enhance the power
  to appropriate the fruits of RD. Patents and the
  relaxation of antitrust activity are the primary
  means by which the government creates such a
  conducive environment and
• the provision of sufficient stimuli to overcome
  the natural inclination of private agents to
  consider only their private benefits when
  choosing the level of innovative activity in
  which to engage. This takes a variety of forms
  ranging from governmental grants and contracts to
  targeted tax incentives.

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Content of innovation policies
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Taxonomy of developing countries according to
their potential for creation of new technologies
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Structure and content of innovation policy across
Singapore, Malaysia, South Africa, India and
Brazil
Fiscal Instruments
Country Tax incentives for RD Research Grants
Government-backed VC
Non-fiscal instruments
1. Singapore
Double deduction on RD expenses for both
Manufacturing and services
Techno-entrepreneurship Fund the
government launched a US 1 billion investment
fund to attract more VC activities to Singapore

• Strengthening tertiary
• education in ST fields
• at the university and
• polytechnic levels
• Engineering to local
• SMEs from FDI
• Strengthening the
• technological
• infrastructure by
• setting up 13 GRIs
• in high-tech areas

• Research incentive
• schemes for companies
• Innovation Development
• Scheme
• Funds for industrial
• clusters
• Promising Local
• Enterprise Scheme

2. Malaysia
Nine different types of tax incentives for RD
No specific Policy on VC industry

• Industry RD Grant
• Scheme
• Technology Acquisition
• Fund
• Intensification of research
• in priority areas
• Commercialisation of
• RD Fund
• Multimedia Grant Scheme
• Demonstrator
• Applicants Grant Scheme

Not clearly articulated
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Fiscal Instruments
Country Tax incentives for RD Research Grants
Government-backed VC
Non-fiscal instruments
3. South Africa
Poorly defined tax incentive scheme
Strengthening tertiary education in ST fields
at the university and polytechnic levels

• Innovation Fund
• Technology and Human
• Resources for Industry
• Programme (THRIP)
• Support Programme for
• Industrial Innovation
• (SPII)
• Partnership in Industrial
• Innovation

No specific policy on VC industry
4. India
Nine different types of tax incentives for RD

• Programme aimed at
• technological self-reliance
• Fund for technology
• development and
• application
• Home grown Technology\
• Programme
• Technology projects on
• mission mode

Strengthening tertiary education in ST fields
at the university and polytechnic levels

• Government-backed
• VS funds
• Reasonably well-
• articulated public
• policies for the
• development of
• venture capital

• The INOVAR project,
• which is in its initial
• stages

Strengthening tertiary education in ST fields
at the university and polytechnic levels
5. Brazil
There are five different types of tax
incentives for RD

• Three different types of
• research grants and loans
• administered by two
• different agencies of the
• government

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An ideal sequencing of innovation policy
instruments Case of Singapore
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Growing imperfections in the market for
disembodied technology- Evidence ii
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Measuring policy outcomesIndicator 2 Record
with respect to patenting
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Measuring policy outcomesIndicator 3 High-tech
export intensity of manufactured exports
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Density of research scientists and engineers
engaged in RD, 1978-2001(number per 10, 000
labour force)
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Limitations of Conventional Indicators(Source
Archibugi, Danielle and Giorgio Sirilli (2000),
The Direct Measurement of Technological
Innovation in Business in Innovation and
enterprise creation Statistics and indicators.
Proceedings of the conference held at Sophia
Antipolis, Novembeer 23024 2000,
ftp//ftp.cordis.lu/pub/innovation-smes/docs/statc
onf_paper_a.pdf
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Non-conventional indicators- The Innovation
Surveys(Source Archibugi, Danielle and Giorgio
Sirilli (2000), The Direct Measurement of
Technological Innovation in Business in
Innovation and enterprise creation Statistics
and indicators. Proceedings of the conference
held at Sophia Antipolis, Novembeer 23024 2000,
ftp//ftp.cordis.lu/pub/innovation-smes/docs/statc
onf_paper_a.pdf)
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Non-conventional indicators of technological
innovationThe case of Community Innovation
Surveys in the context of European Union
countries

• The data
• are collected at enterprise level. The harmonised
  survey gives policy makers and analysts
  information not only on the sectoral level, but
  also a detailed picture of innovation activities
  at the level of European enterprises
• are comparable at European scale. It provides for
  the first time internationally comparable data on
  non-RD resources, devoted to innovation and on
  the output of the innovation processes.
• are representative. It is the first time that
  such a harmonised business survey has been
  implemented at large scale in all EU Member
  States.
• collection is done at regular intervals,

• The Community Innovation survey (CIS), launched
  in 1991 jointly by Eurostat and the Innovation
  and SME Programme, aims at improving the
  empirical basis of innovation theory and policy
  at European level through surveys of innovation
  activities at enterprise level in the Member
  States.
• CIS surveys collect firm-level data on inputs to,
  and outputs of, the innovation process across a
  wide range of industries and across Member States
  and regions in a way that allows their use in
  high-quality analyses
• The first Community Innovation Survey, CIS I, had
  been launched in 1992.The second survey started
  in 1997 and was completed in 1999.The 3rd survey
  is now being carried out, the first results were
  expected for the end of 2002. But according to
  Eurostat, up till now (November 15 2002, only 5
  out of 14 countries with grant agreement with the
  Commission have provided Eurostat with source and
  final CIS3 data (FIN, S, DE, A, DK).

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Some critical issues in the context of CIS

• The unit of analysis- problems involved when
  firms outsource their output
• An adequate definition of innovation- innovation
  is a culture sensitive term
• Issues regarding comparability between sectors

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The Experience with respect to Innovation surveys
in the context of developing countries

• Of the five developing countries in my sample,
  three of them (namely Brazil, Malaysia and South
  Africa ) have experience with innovation surveys
  similar to the CIS.
• But the response rate to these surveys never
  exceeded 10 per of the sample and hence the
  results are unrepresentative.

• In South Africa, hitherto two innovation surveys
  have been conducted. The results of the first
  survey was published in 1996 and the second one
  which was initiated in 2001 is expected to be
  published in March 2003. However the latest
  status report (as on November 30 2002) indicates
  that the actual coverage was only 8.4 per cent
  (616 firms)of the stratified sample of 7339
  firms. The sample itself was only 43 per cent of
  the total population. This means that the actual
  response was only 3.6 per cent of the total
  population
• Malaysia too have conducted two innovation
  surveys. The first one referring to 1994 was
  published in 1996 and the second one which
  covered the period 1997-1999 was published in
  2002.. The response rate was 26 per cent.
• In Brazil, innovation survey is only conducted
  for the state of Sao Paulo

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A more systematic approach towards innovation
indicators
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For further reading...