role of government under globalisation of technology

Role of government under globalisation oftechnology or innovation

Kuldeep, Sarbartho, Sourish

M.A. Applied EconomicsCentre for Development Studies

Thiruvananthapuram

October 31, 2014

Kuldeep, Sarbartho, Sourish Role of government under globalisation of technology or innovation

The quest for...

Topic:

’If technology is indeed globalising, then there is nothing much thatnational governments can do to encourage innovations in an economy’.Examine the empirical validity of this statement.

Outline...

Fragmentation:

If we decompose this topic, we will get the following parts:

Globalisation of technologies or innovations.

Roles of government to encourage these innovations.

Empirical basis of role of government under current globalisedscenario.

Globalisation of technology or innovation...

The phenomenon of ’globalisation’ experienced by the world ofinvention and innovation or technology can be described as”techno-globalism” (Archibugi and Michie, 1995) with its threemeanings. Those are:

– Global exploitation of technology i.e. an increasing proportion of technologicalinnovations are exploited in international markets.

– Global generation of innovations i.e. firms are increasing the internationalintegration of their innovative and technological activities.

– Global technological collaboration i.e. international collaboration between firms,sharing know-how with competitors from different countries, alongwith a parallel process of international collaboration betweengovernments and academic institutions.

A taxonomy of the globalisation of innovation...

Brief description of three meanings of ”techno-globalism”

Evidence on international exploitation of nationally produced innovations

International trade:

– High-tech goods would make up more than 25 percent of goodstraded by 2030 compared to 22 percent in 2013 driven byinternationalization of supply chains, with parts for high-techproducts criss-crossing national borders. (HSBC Research)

Patents extended in foreign countries:

– In 2012, for the first time, the total number of grants issuedworldwide exceeded the one million mark, with 694,200 residentgrants and 439,600 non-resident grants. The 13.7% growth recordedin 2012 was the highest since 2006 (19.2%) and 1996 (24.2%).

Resident and non-resident patent grants worldwide

Note: World totals are WIPO estimates using data covering approximately 120 patent offices (see Data Description). These estimatesinclude patent grants based on direct applications and on PCT national phase entry data.Source: WIPO Statistics Database, October 2013

Evidence on international exploitation of nationally produced innovations

Technological balance of payments:

– Royalties and licence fees are an important part of internationaltechnology flows. Over the past decade, they grew faster than GDPin most countries. In the Russian Federation and China, internationalflows of royalties increased by more than 25% a year.

International technology flows of royalties and licence fees, 2000-11(Average annual growth rate, based on current USD, percentages)

Source: OECD, Technology Balance of Payments Database; OECD, Trade in Services Database; World Bank, World DevelopmentIndicators; OECD, Annual National Accounts Database and OECD estimates, June 2013.

Back to Globalisation of technology or innovation

Evidence on the generation of innovations...

Inward and outward flows of R&D by foreign affiliates:

– Foreign affiliates play an important role in domestic R&D in most ofthe OECD countries. In 2009-10 their contribution varied from69.9% of total business R&D in Ireland to 6.3% in Japan.

K&T-Intensive Industries in the World Economy:

– The U.S. economy had the highest concentration of KTI industriesamong major economies (40% of U.S. GDP). The KTIconcentrations for the European Union (EU) and Japan wereconsiderably lower at 29%–30%.

– Major developing countries have lower KTI shares than developedcountries. The KTI shares in Brazil, China, and India were19%–21%. Turkey had the highest KTI share (23%) among largerdeveloping countries.

R&D expenditures incurred by foreign-controlled affiliates, 2009(As a percentage of R&D performed in the business sector)

Source: OECD, Activity of Multinational Enterprises Database, www.oecd.org/sti/ind/amne.htm and Eurostat Inward FATS Database,June 2013.

Evidence on the generation of innovations...

Location of the inventions:

– The shares of resident applications are high for the upper middleincome and low income countries; however, their shares are distortedby the high number of resident applications filed in China and in theDemocratic People’s Republic of Korea. This evidence indicates thatthe global generation of innovations is far from being with us.

Table: Patent applications by income group

Source: WIPO Statistics Database, October 2013

Evidence on global techno-scientific collaboration...

International inter-firm technical agreements:

– In terms of ownership, the CATI 2006 data can be grouped intoalliances involving only U.S.-owned companies (249), U.S. andforeign-owned companies (356), and only foreign-owned companies(293).

International flows of students:

– The number of foreign undergraduate students in the United Statesincreased substantially (18%) between fall 2011 and fall 2012.

– Between fall 2011 and fall 2012, the number of foreign graduatestudents increased by 3%.

Industrial technology alliances...

Figure: U.S. industrial technology alliances with U.S. and foreign-owned companies,worldwide, by country/ region of partner: 1990-2006

Note: Annual counts of new alliancesSource: CATI-MERIT Database

Evidence on global techno-scientific collaboration

Internationally co-authored scientific papers:

– Co-authored articles with only domestic institutional authorsincreased from 36% of all articles in 1997 to 44% in 2012.Internationally co-authored articles grew from 16% to 25% over thesame period.

– In the United States, 35% of its articles were co-authored withinstitutions in other countries in 2012, compared with 16% in 1997.

The competitive and co-operative conditions in”techno-globalism”...

Table: The regimes of the globalisation of innovation- interactions

Implications for Public Policy...

Debates on Innovation Policies

– “Techno-liberal” version– National System of Innovation

Main argument is that Public polices can play different roles in eachof three categories of innovation.

Government have different interests in each of the threeglobalization types.

International Exploitation of Technology...

It is the most prominent meaning of ”techno-globalism”...

Rivalry among countries- maximising exploitation of owncompetence and minimizing cost of acquisition.

Countries focusing on the most innovative goods and services inforeign market.

Preserving technologies- government help national firm to preservetechnologies.

Different policies for inward flow and outward flow.

Public policies’ targets and instruments for theglobalisation of innovation...

Table: Policy implications for international exploitation of technology or innovation

Table: Policy implications for international generation of innovations by MNEs

Table: Policy implications for international techno-scientific collaboration

R&D growth over the business cycle by source of financing, OECD area, 1982-2012Average annual real growth rate, percentage

Source: OECD, Main Science and Technology Indicators Database

Non-OECD

Source: OECD Science, Technology and Industry Scoreboard 2013. http://dx.doi.org/10.1787/888932891150

Implied tax subsidy on R&D expenditures, 2013

The level of indirect support varies across countries, as indicated by the tax subsidy rate for small profitable firms.

But it may also vary across firm size…

For example, if a small, profitable company in Portugal spends one euro on R&D, it can benefit from tax relief of up to 62 cents.

By contrast, large firms get a tax benefit of only up to 49 cents. But Portugal is unusual.

…less than one third of the OECD countries shown here give them more generous incentives.

Even though small firms everywhere find it harder to invest in R&D than bigger firms…

Of course, many firms – especially small start-ups – lose money in their early years.

If they’re not making a profit, and so not paying tax, the value of R&D tax incentives can disappear …

That’s why some countries allow firms to roll over or cash their tax credits.

But, in many cases, small firms that make a loss don’t enjoy the same tax benefits as profitable firms.

According to OECD research, the real subsidy for small firms that are making a loss…

… matches the subsidy for profitable small firms in only a few OECD countries.

Small firms, and start-ups in particular, drive radical innovations and job creation.

OECD work shows the need to design R&D tax incentives effectively to ensure both big – and small firms – can innovate.

role of government under globalisation of technology

globalisation of technology

globalisation of innovation

sourish role of government

globalisation of technologies

globalisation oftechnology

phenomenon of globalisation

roles of government

empirical basis of role

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