Innovation: An Un-Level Playing Field for Developing Countries

Innovation has always been crucial to economic growth, and never more so than in this era of globalisation.  But globalisation can create innovation winners and losers.  The new book Innovation and Growth: Chasing a Moving Frontier, published jointly by the Organisation for Economic Co-Operation and Development (OECD) and the World Bank, describes how innovation -- not principally from newer science but the penetration of older, infrastructure-intensive technologies like improved water source and sanitation -- puts developing countries on an un-level playing field compared to developed countries.

A book launch and seminar are being held today from 9:45 a.m. to 12:45 p.m. at the World Bank Main Complex (Room MC2-800).  It will feature the book's editors -- Pier Carlo Padoan, Secretary-General and Chief Economist, OECD; Carlos A. Primo Braga, Director, Poverty Reduction and Economic Management Network (PREM), World Bank; Vandana Chandra, Senior Economist, PREM and Development Economics (DEC), World Bank; and Deniz Eröcal, Coordinator, Enhanced Engagement with Non-Member Economies, OECD.

This blog will have more on this event, but here's an excerpt from the book's Introduction summarizing the innovation dilemma:

"In the past few decades, as the international flows of trade, capital and labour have expanded across the global marketplace, the competitiveness and prosperity of high-income economies has come to rely increasingly on their innovative capability. Unlike OECD countries, developing countries’ competitiveness and prosperity remains largely tied to their endowments of natural resources. Their governments have been less successful in fostering technological innovation. Moreover, low productivity levels continue to constrain their competitiveness in the global market.

 "The unique nature of innovative activity and the growing interconnectedness of the world economy call, however, for greater attention to the interplay of openness and technological innovation not only in OECD countries, but also in developing economies.  Innovation systems increasingly rely on 'open' platforms and collaboration side by side with competition. At the same time, the geography of innovation is being redrawn as economic interdependence grows, emerging economies accumulate immaterial assets, and modern communication networks redefine opportunities for 'leapfrogging.' The experience of the so-called 'BRICs' (Brazil, Russia, India and China) is illustrative in this context.

 "This publication comes at a time of global financial and economic crisis. The extent of the crisis is such that many elements of national and global innovation systems are being affected and may be severely compromised. The crisis may affect innovative activities through several channels: lower R&D spending (as private-sector R&D is usually pro-cyclical); loss of human capital (as protracted unemployment may erode existing skills); lower risk taking (as a result of disruptions in financial markets); and weaker international diffusion of technology (reflecting declines in trade and foreign direct investment). While the following chapters do not specifically address these issues, their analyses of the policy challenges faced by countries trying to pursue sustainable innovation-led growth provide useful information for the debate about how innovation can play a role in the process of economic recovery.

"....What seemed like effective innovation strategies (e.g. policies designed to strengthen the R&D capacity of domestic firms) are no longer sufficient for effective catch-up. This is partly due to the changing nature of innovation. The more open and global nature of innovation makes innovation policies more difficult to design, implement and monitor at the national scale alone. These challenges are further complicated by new and still unfolding phenomena, such as the emergence of global value chains and the fragmentation of production, the growing role of global corporations, and the information and communications technology (ICT) revolution. Where a global corporation chooses to anchor its production and why are, in different ways, affecting the playing field for OECD and developing economies alike."