1 east asian economy: kbe and innovation in east asia * some parts of this note are borrowed from...
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East Asian Economy: KBE and Innovation in East Asia
* Some parts of this note are borrowed from the references for teaching purpose only.
1
East Asian Economy <Lecture Note 8> 2013.12.5
Semester: Fall 2013 Time: Thursday 2-5 pm Professor: Yoo Soo Hong Room: 423 Mobile: 010-4001-8060 E-mail: [email protected] Home P.: http://yoosoohong.weebly.com
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Knowledge (Innovation) Based Economy
3
Emerging Knowledge Economy
Increased generation/codification of knowledge (e.g., patents granted in the US: from 49,971 in 1963
to 175,983 in 2000)
Closer links with science base/increased rate of innovation/shorter product life cycles
Increased importance of education, up-skilling of labor force, and life long learning
Growing investment in intangibles (R&D, education, brands…) – OECD countries spend more than
$520 billion per year in R&D
Value added increasingly associated with investment in intangibles such as branding, marketing, lo-
gistics/information management
Innovation and productivity increase more important in competitiveness and GDP growth
Increased Globalization and Competition
Constant change and competition implies the need of constant restructuring and upgrading: the ability
to create, access and use knowledge is becoming the fundamental determinant of global competi-
tiveness.
4
0
2
4
6
8
10
12
14
1960 1965 1970 1975 1980 1985 1990 1995 2000
K n o w le d g e m a k e s th e D if fe r e n c e K n o w le d g e m a k e s th e D if fe r e n c e b e tw e e n P o v e r ty a n d W e a lth . . .b e tw e e n P o v e r ty a n d W e a lth . . .
R e p . o f K o r e a
G h a n a
T h o u s a n d s o f c o n s ta n t 1 9 9 5 U S d o lla r s
D if fe re n c e a t t r ib u te d to k n o w le d g e
D if fe re n c e d u e to p h y s ic a l a n d h u m a n c a p ita l
Knowledge Gap and Wealth of Nations
5
Knowledge Economy
Concept of KBE or KE
- An economy where creation, acquisition, circulation (dissemination) and uti-lization of knowledge is the core (engine) of growth. (OECD)
Why knowledge now?
- “Throughout history, relative economic performance has been closely associated with the capacity of countries to participate in successive technology/knowledge revolutions (agriculture, manufacturing, services, knowledge societies)”;
- “Knowledge has played a critical role in differentiating the long run economic per-formance of countries”;
- “In the last 50 years, economic growth has been closely associated with urbaniza-tion, emergence of new organizational forms, and regional and global trade—all these trends, in turn, are closely linked to agglomeration of people and ideas”
Stages of Economic Development
6
Factor-driven Economy
Investment- driven Economy
Innovation- driven Economy
• Basic factor conditions (low cost labor, natural re-sources, geographic loca-tion) are the dominant sources of competitive advantage
• Technology is assimilated through imports, FDI and imitation
• Companies have limited roles in the value chain, and focus on assembly, labor intensive manufac-turing, and resource ex-traction
• The economy is highly sensitive to world eco-nomic cycles, commodity prices, and exchange rates
• Innovative products and services at the global technology frontier are the dominant sources of competitive advantage
• Characterized by strengths in all areas to-gether with the presence of deep clusters
• Companies compete with unique strategies that are often global in scope
• The economy has a high service share, and is re-silient to external shocks
• Efficiency in producing standard products and services is the dominant source of competitive ad-vantage
• Foreign technology is ac-cessed through licensing, joint ventures, FDI, and imitation
• The nation is not only as-similating foreign tech-nology, but has the capac-ity to improve on it
• Heavy investment is made in efficient infrastructure, modern production process, and ease of do-ing business
Source: Porter, Michael E. Competitive Advantage of Nations, 1990.
Development Stages in the Korean Economy
Stages of Development
Aid,Laborintensiveproduction
1950s1950s 1970s1970s 1980s1980s 1990s1990s 2000s2000s1960s1960s
ImitationSimple tech.Import of oldplant/machinery
Heavy industryAssimilationMinorinnovations
R&DNew product development
R&D intensiveincrease in scienceNew productinnovation
Innovationfrontier
Agricultural Economy
Invesment-driven Economy
“Extensive Growth”
Innovative Economy
“Intensive Growth”
Traditional
Factor-driven Economy“Extensive Growth”
Outward-looking
Innovative Catch-up
Transition to Innovation-driven Economy Out-
ward-looking
Imitative Catch-up
7
8
Strong Correlation: GDP/Capita and KE Index
Source: KAMAfrica GDP/capita = $2624
Regression KEI 2002 and GDP per capita 2002
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00
Knowledge Economy Index 2002
GD
P p
er
ca
pit
a 2
00
2 (
19
95
co
ns
tan
t U
S$
20
02
)
R2 = 0.66Finland
Brazil
ChinaIndia
Korea
RussiaJordan
Ireland
Poland
South Africa
Ethiopia Ghana
Turkey
USA
UK
Slovenia
Taiwan
9
Global economy is changing the landscape of economies in Asia
- Knowledge has increasingly become an important means for value cre-
ation.
- The knowledge content of goods and services is increasing as manu-
facturing is “dematerializing” and economies are becoming
“weightless”.
- Globalization and the ICT revolution are emerging in the modalities of
creating value.
The Importance of KBE
- Knowledge-based economies is a global trend.
- PRC’s economy is expected to be the largest in the world and the Asian
economic landscape will continue to be pushed to high-growth.
The Importance of Knowledge-Based Economy (KBE)
10
Asian government is facilitating and creating opportunities toward a
more knowledge-based economy and society.
Four pillars of a KBE
- Education, including building a skilled workforce
- National innovation systems, including science and technology, R&D
- Building networks, including ICT infrastructure and social networks
- Policy and regulatory (business) environment
New paradigms for managers and policy makers
- Distinction between knowledge and information
- Recognizing and managing intangibles
- Attention to tacit knowledge
- Stakeholder capital in a networked economy and society
- Value-driven development
11
The Four Pillars of the Knowledge Economy
Education
Innovation SystemsInformation Infrastruc-ture
Interconnected
Interdependent
Biz Environment and Institutional Regime
12
Asian governments envision and plan for a mix of KBE
- Thailand’s IT2010: “good use of ICT”
- e-Korea Vision 2006: “quantitative expansion of the Internet”
- e-Japan strategy: “knowledge-emergent society”
Models Toward a Knowledge-Based Economy(KBE)
13
Knowledge-Based Economy Indicators for the Asian Region
14
Education and the skilled workforce
- Skills required in a KBE such as communication skill, critical thinking
and problem solving, sustainable use of resources, development of
self and a sense of community, expanding world vision
- New teaching and learning strategies are needed.
- Diaspora (migration of workforce) is critical issue and Asian countries
face the issue of retaining the skilled workers. “Brain drain” can be
“Brain gain” which raises the skill level of the home country.
The Four Pillars of a Knowledge-Based Economy
15
National innovation systems (NIS)
- “A subsystem of the national economy in which various organizations
and institutions interact and influence each other in the carrying out of
innovative activity.”
- Innovation and improvement in technical capacity are the result of
a complex set of relationships among actors creating, acquiring,
disseminating, and applying various kinds of knowledge.
- Actors are private enterprises, universities and public research
institutions, relevant financial institutions, and the government.
An innovation is the implementation of a new or significantly improved
product (good or service), or process, a new marketing method,
or a new organisational method in business practices, workplace or-
ganisation or external relations. Also, new material or new resources
finding is included in innovation. An innovation creates new values.
16
Building Networks
- Capacity of ICT to support the development of networks and to establish and
maintain connections among individuals, groups, and organizations is
considered to be of great use of and value to others.
- Benefits of ICT and Networks (The ICT revolution has fast-tracked the
innovation process)
- Toward an ubiquitous network society (social computing of voicemail, e-mail,
online chats, and collaborative applications)
- Elements needed in building ICT are an appropriate regulatory framework,
readiness and availability of human resources, research and education of IT
skills.
Setting the policy and regulatory environments
- Policy: legislation, organization/reorganization, and regulations
- Planning: formulation of vision, strategy, and road map
- Infrastructure and programs: establishing and implementing the needed
physical, institutional, and social infrastructure and programs
Gross Expenditures on R&D in PPP by Country and as Percentage of Global Expenditures 2010
17
The R&D Input Landscape
18
19
Framework for Cross-leveraging Knowledge Assets Across the Asian Region
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Technological Catch-up
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Definition of Technology
- Technology is the knowledge useful for production of goods and services.
Importance of Technology
- The history of human being is the history of knowledge (science and technology).
- Technology and productivity are the main engines of economic growth.
- Technology is the main determinant of competitiveness.
- Technology affects welfare of individuals and the society.
Technology and Development
22
Stages of Industrial Development in the World
Agricultural Economy
IndustrialEconomy
Knowledge-based/InnovativeEconomy
• Land
• Labor
• Natural Resources
• Capital
• Labor
• Management
• Science & Technology
• Innovation
• Entrepreneurship
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Technology and Development
Social Infrastructure, Culture And Institutions
Social Infrastructure, Culture And Institutions
Economic GrowthEconomic Growth
Technology DevelopmentTechnology Development
Resources for education, health, communication,Employment
Resources for technologydevelopment
Productivitygains
Advances in medicine,communications, agriculture,energy,Manufacturing, etc.
Knowledge,creativity
Source: UNDP. 2001
24
Two Patterns (Stages) of Economic Growth o Extensive Growth - Increasing production by increasing input of production factors o Intensive Growth - Increasing production by productivity increase (More production is possible with the same resources.)
Technology, Productivity and Economic Growth
Technology → Productivity → Trade and Industry → Economic Growth
Technology and Economic Development
25
Technology and Economic Growth
Creation of
Technology
Creation of
Technology
Investment in
Technology
Investment in
TechnologyInnovationInnovation
Increase in Productivity
Strengthening International
Competitiveness
Increasing Trade
Increase in Productivity
Strengthening International
Competitiveness
Increasing Trade
Economic Growth Economic Growth
First Stage
Second Stage
Virtuous Circle (Increase sin Income, Demand, Investment, etc.)
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120
100
80
60
40
20
0
- Technological innovation plays a key role in productivity increase, long-term economic growth and enhancing living standards. (Innovation is the engine of growth.)
Innovation Capability
0 20 40 60 80 100 120
◆ China
Italy ◆ ◆ Mexico
Korea ◆
◆ Japan
◆Taiwan
◆ German
France◆
◆ Canada
◆ England
◆ USA
Innovation and Economic PerformanceR
elat
ive
Eco
no
mic
Per
form
ance
Note: As of 2000.
27
Two different Development Stages
Extensive Growth:Input-driven growth
Intensive Growth:Innovation (productivity)-driven Growth
- Increase in inputs (e.g. employment, education level, stock of physical capital: mobilization of resources)
- Increase in the output per unit of input (e.g. better management, better economic policy, increase in knowledge, technological progress)
- Diminishing returns - Constant returns
- Limited Growth - Sustained growth
- Based on perspiration - Based on inspiration
Development Stages in the Korean Economy
Stages of Development
Aid,Laborintensiveproduction
1950s1950s 1970s1970s 1980s1980s 1990s1990s 2000s2000s1960s1960s
ImitationSimple tech.Import of oldplant/machinery
Heavy industryAssimilationMinorinnovations
R&DNew product development
R&D intensiveincrease in scienceNew productinnovation
Innovationfrontier
Agricultural Economy
Invesment-driven Economy
“Extensive Growth”
Innovative Economy
“Intensive Growth”
Traditional
Factor-driven Economy“Extensive Growth”
Outward-looking
Innovative Catch-up
Transition to Innovation-driven Economy Out-
ward-looking
Imitative Catch-up
28
Science Technology and Innovation
Science is the process of generating knowledge based on logic and evi-dence.
Technology is the application of scientific knowledge to production, and frequently involves invention, i.e, the creation of a novel object, process or technique.
Innovation is the process bringing together new ideas and technology, or finding novel applications of existing technologies. Generally, innovation means developing new ways of doing things in a place or by people where they have not been used before. Modern innovation is usually stimulated by innovation systems and pathways.
The phrase ‘Science and Innovation’ implicitly includes science, engineer-ing, technology and the production systems which deliver them.
29
Five Dimensions of STI Capacity
National (and local)government capacity to formulate and implement coherentS&T programs and policies
Enterprise capacity toutilize knowledge to innovate and producehigher value added,globally competitivegoods and services
Technologically andscientifically skilledworkforce trained to equipment andproduction processes
Production of newknowledge via R&D
Import, adapt, andadopt knowledgeproduced outside thecountry
Source: Ansu, Yaw, 2007 30
STAGE ONE
Simple manu-fact-uring un-der forei-gn guidance
STAGE TWO
Have support-ing industries, but st-ill under foreign guid-
ance
STAGE THREE
Management & te-chnology
mastere-d, can produce hig-h quality goods
STAGE FOUR
Full capability in in-novation and pro-duct design
as glo-bal leader
VietnamThailand, Malaysia
China-1
Korea, Taiwan,
China-2
Japan, US, EU
Agglomeration
(acceleration of FDI)
Creativity
Border to Middle
Income Economies
Stages of Catching-up Industrialization
Initial FDI
absorption
Internalizing
parts and
components
Technology
absorption
Internalizing
skills and
technology
Internalizing
innovation
STAGE ZERO
Monoculture, sub-sistence
agriculture, aid depende-ncy
Pre-
industrialization
Arrival of
manufacturing
FDI
Poor countries
in Africa
31
Source: Kenichi Ohno. 2009
32
Acquisition
Assimilation
Improvement
Creation
Stages of Technology Capacity Building
Developing
Country
Newly-Industrializing
Country
Advanced
Country
Imitation Internalization GeneratingS&T & R&D Stages
DevelopmentStages
33
Imitation Stage
Internalization Stage
Generating Stage
Assimilation of imported technologies
Product based innovation
Automobile, shipbuilding, DRAM, CDMA, TFT-LCD
Path-navigating innovation
Fuel cell, 4G mobile handset, next generation vehicle
Textiles and consumer electronics
The Example of Korea
Catch-Up Oriented Industrial Technological Capabilities in Developing Countries
Accelerate Enhancement
Aim for Independent Innovation
Firm-Level National-Project-Level Take Leaders as Reference
In-dus-try-Level
Coordinated Development of System
CapabilityEnhance-
ment
ExternalSupports
InternalEfforts
CapabilityEnhance-ment
IndependentDevelopment
Closing toAdvanced Level
Capability Enhancement
Core Technologies, Advanced Technologies…
Industry Planning, Policy, Effects
Source: Hong, Su, Lu 34
35
R&D Expenditure / GDP by Region
36
R&D Expenditures in Asian Countries (in US$ million)
Reprinted from: Ismail, M. 2013. p.5.
37
High Technology by Sector
Reprinted from: Ismail, M. 2013. p.4.
38
Knowledge-based Development (KBD)
The central ideas of the KBD
- Shifting value creation toward creation and useful application of human
knowledge;
- Creation, development, and deployment of three types of knowledge assets:
knowledge embodied in people (human capital), knowledge embedded in
formal or informal structures and processes (structural or process capital),
and knowledge, information and support from relationships, linkages and
networks (stakeholder capital).
- Attention to the three value domains of sustainable development (economic,
socio-cultural, and natural) and hence a strategic national perspective for
leveraging on a country’s unique mix of financial, intellectual, socio-cultural,
and natural capital.
Leveraging on a country’s unique human capital
39
Setting up structural capital that empowers farmers
Innovating new sustainable enterprise models
Knowledge networking for critical capabilities
Building on indigenous social capital for enterprise development
Optimum mix of overseas development assistance, private, and public in-vestment in various forms of capital
40
East Asian Regional Initiatives
Formulation of a KBD Model
Focused Anti-Poverty KBD development agenda
Training of economic/development planners and establishment of an
e-community of KBD planners in Asia
Cross-leverage knowledge assets across the Asian region
Networking of Asian institutions in knowledge management and organi-zational learning
Assist in formulating KBE plans
Policy study on cross-border e-commerce
National Science Strategies-NEA
Japan
2001 Knowledge Cluster Industrial Cluster initiatives2006-2010 3rd Science Basic PlanRegional Innovation Systems
Council for S&T Policy (CSTP)21st Century Centres of Excellence
South Korea
2003 Balanced National and Regional DevelopmentRegional Innovation SystemsNURI (New University for Regional Innovation)
Brain Korea 21
China
2006 11th National 5year Guidance, Issues of balanced development; Regional Innovation Systems
Establishing over 40 economic and technical zones to attract foreign high-tech FDIs; Helping MNCs to establish R&D center
863 plan (80s)Torch program (1988- ) 53 high tech zonesReforms in Chinese Academy of Sciences (CAS) Knowledge innovation program (2001-)211, 985 1st , 2nd phase
41
42
Inter-organisational and Regional Learning
‐ Taiwan – Developing local technological capabilities of SMEs, ITRI; brain circulation between Hsinchu and Silicon Valley and mainland China
- Singapore –Big science initiatives, National Research Foundation (NRF) , A*Star; attraction of foreign talents and institutes
- Daejon/Korea – KAIST, high tech amalgamation and entrepreneurship. R&D concentration in Seoul.
43
MNEs and Academic Capabilities: China
• 750 R&D centres with foreign investment in China in big cities (e.g. Beijing, Shanghai, Guanzhou and Shenzen) in 2005
• Re-integration (R&D with production sales) and re-agglomeration (spatially close to each other) in the Beijing-Tianjin city-region
• Competition for talents in Beijing and Shanghai and decentralising efforts in collaboration with the top universities in the regions
• Localisation of the MNC R&D centres
• Intra-country spatial dynamics
• Building RIS with universities and MNEs
44
Global R&D Landscape (2012)
4545
Interactions in a National Innovation System Interactions in a National Innovation System
University ResearchInstitutes
ResearchInstitutes
GovernmentGovernment
Industry
IndigenousKnowledgeBase
IndigenousKnowledgeBase
GlobalKnowledgeBase
GlobalKnowledgeBase
KnowledgeFunding
Researchers
GraduatesGrants
Tax
Incentives
Grants
Funding
Technology
Knowledge
Knowledge
• Industrial & Technological Deepening• Transition to Knowledge Based Economy• Sustainable Economic Growth
• Industrial & Technological Deepening• Transition to Knowledge Based Economy• Sustainable Economic Growth
Funding
Source: Suh. 2000Source: Suh. 2000
46
Roles of the Three Main Players
Universities – undertake basic science and technology research– educate scientists and technologists needed by business and government
Governments – design IPR system for business and universities – commission science research e.g. for defense – finance universities, subsidise business R&D
Business (Private) sector – conduct R&D to develop commercial products – launch innovative products – start up new firms to exploit new science
47
Conceptualization of the R&D system
Source: Jeong Hyop Lee. “Evolution of Republic of Korea’s R&D System in a Global Economy”.
48
Innovation
49
50
Types of Innovations
Product innovation: introduction of a good or service that is new or signific-antly improved with respect to its characteristics or intended uses. This in-cludes significant improvements in technical specifications, components and materials, incorporated software, user friendliness or other functional character-istics.
Process innovation: implementation of a new or significantly improved pro-duction or delivery method. This includes significant changes in techniques, equipment and/or software.
Marketing innovation: implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing.
Organisational innovation: implementation of a new organisational method in the firm’s business practices, workplace organisation or external relations.
New resources or material: used as inputs of production
LG Electronics, Samsung Electronics
22.3 (1)Air-conditioners
Samsung Electronics, LG Electronics.
14.3 (1)Refrigerators
Hyundai Heavy Industries,Doosan Engine Co.,STX Heavy Industries
59.6 (1)Large diesel en-gines for ships
Hyundai Heavy Industries, Samsung Heavy Industries, Daewoo Shipbuilding & Ma-rine Engineering Co.
80.0 (1)LNG carriers
Hyundai-Kia Motors, GM Daewoo
9.8 (4)Automobiles
Samsung Electronics, LG.Philips LCD 46.5 (1)TFT-LCDs
Samsung Electronics,Hynix Semiconductor
49 (1)Semiconductors
CompanyWorld market share% (Rank)
Product
Petrochemical products
LG Chem, SK 45 (1)
Industrial Power of Korea(Most recent period)
5151
Roles of Government and Private in R&D in IT
52Source : DaeJae Jin
5353
Shift in STI Policy in Korea
Focus
View
Resource Allocation
Governance
Strengthening ST capacity Supporting industrial development
Domestic-orientation
Emphasize investment increase Unbalanced regional allocation
Government-led ST personnel initiate
Leading KBE Creating new industries, Growth engine Meet social demand
Globalization utilization of foreign resources
Enhancing efficiency of R&D Balanced regional development
Partnership among government, people, region Increasing participation of citizens in ST decisions
5454
National Innovation Strategy
Innovation Resources Innovation Policy
• Science & engineering workforce • Access to higher and postgraduate education• Availability of risk capital• High quality of information • Infrastructure
• Subsidy and grant program• R&D tax policy• Education policy & funding• Intellectual property protection policy• Openness to international trade and investment
National “Knowledge” Stock
• “Basic” research investments• Cumulative innovation record• Overall technological sophistication
5555
Strategies for Securing National Competitiveness
Acquisition of World-top-class Technologies - Korea should pour more R&D efforts to core technologies and emerging technologies on the basis of strong basic science
World Class Education for HRD - For this and stronger international competitiveness, the Korean education system should be reformed as quickly and broadly as possible
Innovation-driven Economy and Innovation of NIS - Through a balanced and efficient NIS, Korea should realize an innovation- driven economy ahead of China
Active Opening of the Economy - All these require active opening of the economy to the world. The whole country should be a ‘special economic zone’
Critical Lessons
- Investing in S&T capacity is not a luxury for the rich; it is an absolute ne-cessity for poor countries that wish to become richer – there is no choice.
- The time to start investing and building capacity is when you are poor.
- Countries at different stages of development, and employing different learn-ing strategies, need to invest in different aspects of S&T capacity – plugging in, catching up, innovating: different tasks and challenges for different stages of development.
56
Innovation Approaches
Market-Driven Innovation
- Innovation for (Product ⇒ Technology)
Technology-Driven Innovation
- Innovation for (Technology ⇒ Product)
TechnologyProductMarket
Market /Demand Pull Technology/R&D
TechnologyProductMarket
Market /Demand Technology Push
57
(Yen Billion)
5858
Comparison of the Operating Profits of Samsung and Japanese Electronics Companies (Jul-Sep,
2009)
Source: Compiled from Japanese Newspapers
59
Five Strong Points of Korean Firms Viewed by Japan
Adversary or recession is the period to drive- It is the best time to leap forward when the rival is retreating.
Discard egalitarianism (=everything is equally important)- Concentrate on growing or emerging areas without worrying barriers or
difficulties
Commodities rather than products- Instead of enforcing selling technologically superior products, develop
commodities wanted by buyers
Do not depend on the domestic market- Always conscious of the world market
Endlessly learning and practice- Diligently learn superior techniques to re-create own capability
60
Outward-looking development strategy
- Government policy toward FDI and TT Focus on indigenous R&D
- Government-led industrial development
- Industry-targeting
- Favoring large enterprises R&D system biased for large enter-prises
- S&T for industrialization R&D system biased toward technology devel-opment
- Rich pool of well educated HR in ST High absorptive capacity
- Government-led development of S&T infrastructure Relative impor-tance of GRIs
Key Factors of the Korean NIS Development
61
Strengthening innovation systems
• Increases in government funding for R&D
• Change in funding and governance of public research– More project funding– More targeting of priority areas (IT, biotech, nano, energy)– Greater use of priority setting
• Support for business R&D increasing– Entrepreneurship and SME financing– Shift in financing of business R&D away from direct funding and
toward tax incentives
• Strenthening industry-science linkages– Boost patenting & licensing of public research– Proliferation of public/private partnerships– Collaborative research
62
Asian-Pacific STI: Different Industry Structures
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Japan United States(2002)
Korea (2001) Australia(2002)
New Zealand
Fewer than 50 50-249 250 or more
R&D by size of firm
0
20
40
60
80
100
UnitedStates
Korea(2003)
OECD EU Japan Australia
%High-technology Medium-high technology Medium-low- and low-technology
Source: OECD, R&D Database, June 2005.
R&D by industry sector
63
Different Institutional Role in R&D and Innovation
0
10
20
30
40
50
60
70
80
90
100
Sw
ed
en
Ko
rea
Jap
an
Un
ited
Sta
tes
OE
CD
EU
-25
Ch
ina
Au
stra
lia
Ne
w Z
ea
lan
d
Me
xico
Industry Higher EducationGovernment Private Non-Profit
By source of funding By performer
Source: OECD Main Science & Technology Indicators, June 2005
0
10
20
30
40
50
60
70
80
90
100
Jap
an
Ko
rea
Sw
ed
en
Un
ited
Sta
tes
OE
CD
Ch
ina
EU
-25
Au
stra
lia
Ne
w Z
ea
lan
d
Me
xico
Industry Government Other Abroad
Human Resources: Researchers
0
2
4
6
8
10
12
14
16
18
20
Finland Japan UnitedStates(1999)
NewZealand(2001)
Australia(2002)
Korea OECD(2000)
EU25(2002)
China Mexico(1999)
of which: business enterprise researchers Others
• Total number of researchers in China = 811,000 in 2002, up from 471,000 in 1991.
• Most recent figures for US, EU, Japan and Korea in 2001/2 were: 1.2 billion; 1.0 billion, 676 thousand, and 136 thousand, respectively
• Researchers per thousand have increased in all Asia-Pacific countries, US, and EU.
Researchers per 1000 employment
Source: OECD Main Science & Technology Indicators, June 200564
65
Supplies of Scientists and Engineers
30.8 33.4 13.0 33.2 31.3 29.0 33.4 32.8 39.3 35.2
0
5
10
15
20
25
30
35
40
45
Ko
rea
EU
-15
Jap
an
Me
xico
OE
CD
Be
lgiu
m
EU
-19
Au
stra
lia
Ne
w Z
ea
lan
d
Un
ited
Sta
tes
%Science degrees Engineering degrees Share of women % S&E in 1998
Percentage of S&E degrees awarded to women
Share of S&E degrees in all tertiary level degrees
Source: OECD Education Database, June 2005
National R&D Priorities in Asia-Pacific Countries
Australia Environmentally sustainability; promotion and maintenance of good health; frontier technologies for transforming industry; safeguarding Australia.
Japan Life science, ICT, environment; nanotechnology and materials.
Korea Digital TV & broadcast; displays; intelligent robots; new generation automobiles; semiconductors; mobile communication; intelligent home networks; digital content & solutions; batteries; biomedicine.
New Zealand Biotechnology; ICT, creative industries.
United States Homeland security; networking and information technology; nanotech; priority areas of physics, biology of complex systems; climate, water and hydrogen.
Source: OECD Science, Technology and Industry Outlook 2004 66
Often Linked to NPSstrategies
Australia Backing Australia’s Ability
Strengthen ability to generate ideas, undertake research; accelerate commercialisation; develop & maintain skills
China Revitalizing the Nation through Science and Education
Improve opportunities for market-based innovation to improve economic growth and performance
Japan S&T Basic Plan Boost economic effects and social benefits of intellectual assets
New Zealand
I3 Challenge Define national needs, strengthen long-term research, extract greater commercial value
Source: OECD Science, Technology and Industry Outlook 2004.
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Key Policy Goal: Economic Catch-up
• Strengthen growth through innovation and adoption of technologies from ex-ternal 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.
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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 com-
petition 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.
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US Patent Application Trends
Source: USPTO
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Trends in R&D/GDP
Source: OECD
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Comparison of R&D/GDP
Source: OECD, UNESCO
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Catch-up with US 1970-2010
Source: OECD
(Constant market prices at 2005 ppps)
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OECD’s Recommendation for Innovation by Development Level
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Drawing Lessons from Country Experiences
Strong leadership and political will
Clear policy direction and adequate support for implementation
R&D investment
Strengthening linkages with the private sector
Exploring innovative ways of achieving desired outcomes
Use of ICT for marginalized groups
- Farmers, poor communities, underprivileged sectors have been provided
online support.
- Rural kiosks in India, Cybercare in Malaysia, Promotion local products in
Thailand, IT education in ROK
Observations and Lessons
- Ability to produce new knowledge (R&D) is important, but the ability to absorb and utilize existing knowledge may be even more important at early stages of development – National systems of economic learning and technology diffu-sion.
- Absorptive capacity of enterprises and labor force must be developed – spillovers (from FDI) are not automatic.
- S&T capacity building policies should be devised within the context of an overall industrial development strategy – not separately
- Getting basics right-rule of law, business climate, etc. - is absolutely neces-sary but not sufficient.
- Goal of universal primary education should be complemented by expanded ac-cess to vocational, secondary and tertiary education.
- Political commitment is needed since it takes a long time for capacity building to affect economic development and poverty.
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- A critical challenge is increasing the effective demand for R&D by develop-ing enterprise capacity to innovate and utilize knowledge.
- Tension between expanding the supply of skilled workers and the private sector’s demand for skilled workers-chicken and egg / brain drain vs. skill shortage
- How firms learn, from whom, and how they innovate is a key issue.
- Freer trade and attracting FDI is necessary but not sufficient – spillovers will not occur without accompanying capacity building efforts.
- Increased spending on education and/or R&D will not improve economic performance, if there are poor linkages between research institutes and education sector on the one hand and enterprise sector on the other. Linkages, quality and relevance are critical.
- Need for focus and realism – don’t spread resources too thin; develop a few niche areas; today’s comparative advantage vs. tomorrow’s needs; existing strengths vs. new competencies – comparative advantage must be created.
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References
Brad, Carlos A. P. 2003. “Leveraging the Knowledge Economy”, World Bank (PPT, Google).
Crafts, Nick. “Divergence Big Time: Economic Growth Since 1870”, (PPT, Google).
Mowery, David C.. 2012. Notes on innovation policy and development.
Paic, Alan. 2011. “Enhancing South East Europe Competitiveness through in-novation and human capital development”, Bank of Greece-University of Oxford (SEESOX) Conference Athens (PPT, Google).
Ray, A. S. & Bhaduri, S. “A game theoretic model of optimum IPR regime and technological capability: Implications of TRIPS for developing countries”, Jawaharlal Nehru Univ., India (PPT, Google).
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Sheehan, Jerry. 2005. “Science, Technology and Innovation in the Asia-Pa-cific Region: Trends and Policy”. (PPT. OECD)
Rodriguez, Francisco & Wilson, Ernest J. III. “Are Poor Countries Losing the Information Revolution?”, University of Maryland at College Park (PPT, Google).
Watkins, Alfred. 2005. “Building Science, Technology, and Innovation Ca-pacity for Development”, S&T Program Coordinator HDNED, Presenta-tion to STI Thematic Group (PPT, Google).