Innovation & Technological Capabilities in Developing Countries. Xiaolan Fu Oxford University

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1 Innovation & Technological Capabilities in Developing Countries Xiaolan Fu Oxford University UN General Assembly meeting Fostering science, technology & innovation, New York, Dec 10, 2014

2 Outline Progress (catch up) has been achieved Gaps that remain Policy actions (both national & international) to address them.

3 Catch up and Gaps (1) Percentage Composition of Patent application numbers by income levels, % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Low income Middle income High income Source: World Bank

4 Catch up and Gaps (2) Share of Scientific and technical journal articles across income groups Pencentage 100% % 80% % 60% 50% 40% 30% % 10% 0% High income Middle income Low income Source: World Bank

5 Global distribution of R&D Expenditure (USD Billion, PPP dollars, 2011) North America + Europe + East&SE Asia = 88% Source: NSF

6 BRICS countries, especially China, contribute to the catch up in the middle income countries Research and development expenditure (% of GDP) Ratio OECD members BRICS China India Brazil Russia Fed. South Africa Source: World Bank

7 Exceptions where LICs show a significant progress: Mobile cellular subscriptions ( , per 100 people) High income Upper middle income Lower middle income Low income Source: World Bank

8 Firms in LICs are innovative: Mainly low cost innovations based on learning & management innovations Informal Formal Product innovation Management innovation Process innovation Marketing innovation Source: DILIC survey, Fu et al (2014)

9 But face significant constraints Source: DILIC survey, Fu et al (2014)

10 Benefits from technology transfer not fully realised Top 10 important foreign knowledge sources (1 5, Insignificant=1, Crucial = 5) MEAN A. Imported machinery and equipment 2.18 B. Imported goods in the same industry 1.73 C. Imported goods that input as intermediary goods into your production 1.72 D. Foreign customers 1.64 E. Observing and imitating competitors in export market 1.54 F. New product or quality requirement raised by customers in export market 1.50 G. Foreign firms in the same industry 1.52 H. Foreign firms In downstream industry 1.51 I. Information found via internet 1.55 J. Attending international trade fairs 1.52 Source: DILIC survey, Fu et al (2014)

11 Low in collaboration & universities linkages 1. During the three years 2011 to 2013, did your enterprise co-operate on any of your innovation activities with other enterprises or institutions? Yes (1) No (0) 8% 92% Yes (1) No (0) 27A. Do you have the intention to collaborate with universities? 30% 70% 2. If you have NOT collaborated with universities, why? Please tick all that apply. A. We do not have such need 205 (43%) B. They are not interested 113 (24%) C. We are not connected 325 (68%) 3. How was the connection with the University established? Personal network (1) 74% University approached us (2) 0% Governmental initiative (3) 26% Source: DILIC survey, Fu et al (2014)

12 Summary: Innovation & technology in developing countries Uneven development: multiple speed (catch up in a few MICs but not LICs) Firms in low income countries are innovative (in low cost form) but unsupported Lack of finance remains the major constraint, followed by the lack of skills Low in collaboration and international technology transfer

13 Policy actions (national) Financing for innovation: Public finance is not sufficient. Private sector to participate. Build an innovation financing system with a variety of funding sources working at different stages. Capability building: Education and training system, Collaboration, SME production network (policy) University industry linkage (program, funding) Cultural and institutional change: Change of traditional perspective (leaders, policy & media) IPR protection (differentiated policy)

14 Policy actions (international) Financing for innovation Official development aid Foreign direct investment (FDI/MNEs) Capability building International collaboration in training & networking Technology transfer International collaboration (South South: appropriate tech.) Use Green technology as the lead driver Private sector: Trade / FDI Infrastructure & Internet for access: Technology Bank