KNOWLEDGE GOVERNANCE:

Reasserting the Public Interest

Leonardo Burlamaqui

University of the State of Rio de Janeiro

MINDS

The Levy Economics Institute

leonardo.burlamaqui@minds.org.br

Prepared for the International Conference on

The Role of the State in the XXI Century

Enap- Brasília, September, 3-4 2015

THE VISION

From a corporate perspective, it’s

appropriate to shape corporate strategy

having IPR’s as key elements to protect

competitive advantages and maximize

appropriability, profits and rents.

THE PROBLEM

By contrast, from a public policy/ public

interest perspective, the appropriate

concern should be to…

increase knowledge production,

dissemination & democratization,

rather than appropriability and rents.

THE PROBLEM

In that case, Knowledge Governance, not

strong IP regimes, should become the

proper domain for crafting policy and

institutional design.

THE SOLUTION

A SURPRISING ALLY….. Abuse of the patent system benefits neither

inventors nor the economy at large Mar 3rd 2015 | Business and finance

Patents are protected by governments

because they are held to promote innovation.

But there is plenty of evidence that they do

not.

Aug 8th 2015 | From the print edition

To the question “where do INNOVATIONS come

from in the developed countries?” a very large part of the answer includes:

Publicly funded R&D,

Public labs,

Government contracting to buy things from the private sector that do not exist (innovations).

INNOVATIONS: PUBLIC ACTION IS KEY

Today, armed with an annual procurement

budget of $450 billion – more than 1 trillion if

states are included – the US Government plays a

crucial role in governing the way knowledge and

innovations are produced. (Weiss: 2014, Block:

2010).

Some U.S Public venture capital agencies: Dep.

Of Energy, CIA, ARMY, NAVY…..(Mazzucato:2013)

THE U.S CASE

ILLUSTRATION:

“CHINA DEVELOPMENT BANK maintained a steady

course in 2013, performing strongly in both its

business and social mandates as a development

finance institution”.

Assets: U$ 1,3 Trillion.

NPL ratio: 0.48% (less than 1% for the thirty-fifth

consecutive quarter).

Year-end profit : U$ 13 Billion.

Capital adequacy: 11.28%.

( Source: CDB website, 2014)

CHINA

Some “Prominent Clients”

• Huawei

• Lenovo

• Haier

• ZTE (Telecom)

• Yingli (Solar panels)

• Sky Solar

• National Development Zones for High and New

Technology Industries ( part of China 2030 strategy)

CDB & Tech: A Competitiveness Strategy

CDB & Energy: A Global Strategy

To the question “where do PROFITS come from in

the developed countries?” a very large part of the

answer includes:

Using IP enforcement to convert Schumpeterian

profits into monopoly rents,

Using the WTO to help open up markets for those

innovations abroad and to extend the rents they are

able to generate,

Summing –up: Profits without prosperity ( growth)

PROFITS: CORPORATE POWER IS KEY

THE PROBLEM RESTATED AS A GOVERNANCE ONE Two ideal-type regimes of governing knowledge

Corporate

Returns

Knowledge

spreading

trough

innovation

diffusion

Schumpeterian

Ricardian

First movers’

advantages &

Δ Productivity

IP RENTISM

Structural

Change &

Development

Information

Feudalism

CAPABILITIES:

Ability to create and manage

resources strategically and

build competitiveness

CAPABILITIES:

Ability to exclude

competitors via IP rules and

Bi-lateral trade agreements

Innovation-

based

Based on the

difficulty to

replicate

Global

Knowledge

monopolies

Creative

destruction

Destructive

creation

STRONG IP RULES AND REGULATIONS OR

GOVERNANCE BY LOBBYING

KNOWLEDGE GOVERNANCE

General rule: using government’s supervision,

regulation and deal-making powers to promote the

production, dissemination and democratization of

knowledge by means of market shaping initiatives .

Scope: the whole economic system, but especially

knowledge intensive, technologically complex &

productivity enhancing activities.

Main goal: the creation of a more inclusive

and more development-oriented knowledge

ecology,

Main institutional tool: Inter-agency

coordination.

Other tools:

Building a governance framework composed by:

A “publicly funded research commons”,

Private research consortia,

Public funding agencies' co-managing the

licensing of technology.

Other tools:

A progressive tax on patents earned but not

used or licensed,

In order to avoid unproductive entrepreneurship springing from “strategic patenting” .

Incentives towards cross-licensing. In order to avoid winner-takes-all-markets due to the combination

of strong IPRs with network externalities and increasing returns –

common features of “new economy’s” leading sectors.

Inter-agency regulatory cooperation: patent offices

should be linked with other public agencies funding

R&D, fostering innovation and enforcing

competition policies .

Pilot: A knowledge governance coordinating body

to allow collaboration within the existing regulatory

agencies.

The reinstatement of weberian state structures

should become a priority in order to restore state

capacity (The Singapore model).

The policy-institutions framework resulting from the framework outlined above should:

Be flexible and pragmatic: rules for a dynamic/ evolving environment.

Approach knowledge as a global public good,

Have the governance of knowledge shaped by the

public interest, and knowledge dissemination (the “

Schumpeterian Package”) as its main goal.

Be anti-unproductive entrepreneurship, not anti-bigness,

Be pro-cooperation, leaving room for business networks to thrive but allowing for government’s supervision powers to monitor them,

Be pro-effectiveness in the sense of protecting the innovation’s cycle, not the innovator * .

* Aiming at delivering the Schumpeterian package: increased quality,

decreased costs, lower prices, windfall profits (not monopoly rents),

higher real wages and innovation diffusion.

None of these policy prescriptions will be achieved without a huge dose of “strategic state action”

Most of them will also require a high degree of “international deal making”, including a deep revision of international treaties like TRIPS and bi-lateral trade agreements.

Uneasy tasks …

But… now, post W.C, maybe there is a window of opportunity.

THANK YOU