INNOVATION AND PSD ISSUES IN THE EUROPE AND CENTRAL ASIA REGION

1
INNOVATION AND PSD ISSUES IN THE EUROPE AND
CENTRAL ASIA REGION

• Alfred Watkins (37277)
• Lead PSD Specialist
• ECSPF

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CHALLENGE

• Convert knowledge to wealth
• Generally speaking, ECA countries have well
  educated populations, even at the tertiary
  education level, but lack the organizational and
  industrial capacity to utilize this resource

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Competitiveness Challenges

• Commercialize RD convert knowledge into wealth
• Upgrade technology to enhance economic
  competitiveness and productivity in non-high tech
  sectors
• Potential danger generation of high tech
  enclaves with few beneficial spillovers to rest
  of economy

4
Competitiveness Challenges Lead To Policy Dilemmas

• RD vs. Technology Upgrading
• High tech vs. Traditional Sectors
• SMEs vs. Large enterprises
• Scientists and Engineers vs. Everything Else
• Numerical Targets vs. Structural Reforms

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RD Vs. Technology Upgrading

• RD
• Design
• Engineering
• Acquisition
• Use

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RD Vs. Technology Upgrading

• Policy makers emphasize RD and ignore other
  layers of the technology pyramid .
• but most firms in candidate countries and FSU do
  not perform RD, finance RD, or use RD
  conducted elsewhere
• their technology is obsolete and low productivity
  reduces their competitiveness

7
Technology Upgrading Capability

• To upgrade technology, firms need to be aware of
  their technological challenges and options and
  able to implement the needed solutions
• Do local enterprises have the managerial,
  technical and organizational capacity to find,
  modify, absorb and utilize innovations?
• If not, can public and private policies help to
  remove these deficiencies?

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In what group are local firms?
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To generate prosperity, should economic policy
focus on high tech or traditional sectors?
 
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Isolated SMEs vs. Clusters

• Dynamic SMEs must be embedded in regional,
  national or global value chains with dynamic
  clients, customers and suppliers
• links to large and small, local and foreign firms
  generate dynamic firms
• Otherwise, SMEs are in a survival mode
• Living dead, subsistence firms rather than
  engines for growth and competitiveness

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Scientists Vs. Other ThingsPorter and Stern
Rankings
Total SE Innov. Policy Cluster Linkage
Czech 26 36 26 29 29
Hung 28 34 25 38 25
Russ 30 3 52 30 42
Ukr 32 21 56 28 35
Pol 36 32 50 37 36
Latv 41 37 51 43 47
Bulg 50 27 64 67 73
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Scientists vs. other things

• Most transition countries rank relatively high on
  scientists and engineers and relatively low on
  the other variables
• Problem is relative inability to utilize
  knowledge deficit of social and organizational
  capital not human capital
• Czech and Hungary rank highest among transition
  countries and are notable exceptions to this
  generalization

14
Numerical Targets vs. Structural Reform

• In competitive economies, government,
  RD/education, and enterprise sectors work to
  reinforce each other
• the triple helix
• Transition economies have a triple silos

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The Industrial Technology Development System A
Schematic Framework
                                         
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Slowly Changing Historical Legacy

• Networking, trusting communication links vs. KGB
• Locational proximity vs. Stalinist planning based
  on separation, control, and isolation
• Old supply chains disappeared with Comecon how
  to insert into global supply chains
• States as laboratories of democracy (Brandeis)
  vs. penchant for central authority

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Issues for Future Research

• Role of FDI, spillovers, and technology upgrading
• Skill development centers Penang as cooperative
  model? Krasnoyarsk?
• How to find high value added, high wage, high
  skill niches in global division of labor
• Clusters, links to demanding customers, creation
  of suppliers with quality control and technical
  skills
• How to upgrade skill intensity of local
  enterprises

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Russia ST Project -- Issues

• Expensive foreign patenting
• Isolation from global markets
• Sale of prototypes
• Lack of finance
• Limited commercialization structures
• Dont know how to proceed and how to learn from
  international lessons of experience

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Potential World Bank Project

• Matching grant programs (i) cost of foreign
  patenting (ii) joint RD/contract research
  programs (iii) SBIR (iv) partnership visits
  (v) others
• Pilot technology commercialization centers (i)
  technology audits (ii) TTOs (iii) incubators
  (iv) marketing (v) commercialization strategy
  (vi) coaching and training