Innovation for Inclusive Growth

Caroline Paunov Directorate for Science, Technology and Innovation OECD 2nd Euro-Mediterranean Brokerage & Venturing Event on Research and Innovation Berlin – 25/26 February 2015

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Inclusive Innovations

Mobile money

3D printing from waste

2000$ car

“Assembly line” cataract surgeries

Community phone shop

Off the grid electricity

Low-cost portable ECG

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Inclusive Innovations

Mobile money

“Assembly line” cataract surgeries

Community phone shop

Low-cost portable ECG

The Context for Inclusive Innovation

Supply factors

Larger opportunities for welfare and businesses of lower-income groups

Improved conditions for inclusive innovations

Firms and other entities introduce more financially sustainable inclusive

innovations

Reduced development costs

Demand factors

Role of emerging economies in the global economy

Larger middle class in emerging economies

Access to finance

Market conditions for firms

Access to expertise and knowledge

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Distinctive Characteristics

Types and scale of innovations Types and scale of innovations

Access to finance

Market conditions for firms

Access to expertise and knowledge

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Policy Approaches in Support

Market and product regulations

Co-operation within government

Access to expertise and knowledge for grassroots

Fostering co-ordination across actors

International co-operation

Financial support mechanisms

Sub-national governance

Policy Responses

Limited awareness and use of IP

Informality limits access to public service

Intellectual property rights policies

Lack of understanding causes low uptake

Types and scale of innovations

Access to finance

Access to expertise and knowledge

Market conditions for firms

Larger risk and delays for uptake restrict access

Lack of financial inclusion for grassroots innovators

Low absorptive capacity and access to knowledge

networks

Lack of expertise

Private provision of public services

Adaptation to local needs

• Innovation-driven growth and creative destruction

• Global competition with “winners” and “ losers”…

• Industrial and territorial inclusiveness provide a link from innovation to social inclusiveness

The Economics of Inclusiveness and Innovation

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Industrial and Territorial Inclusiveness

87 83

81 73 73

72 65 64 64 64

62 60

57 55

54 52

51 49 49

45 44

42 30

26 0 20 40 60 80 100

TurkeyCanada

AustraliaChile

China (TL2)United States

FinlandGreece

SpainBrazil (TL2)

MexicoIndia (TL2)

FranceSweden

KoreaNetherlands

PortugalJapan

South Africa (TL2)United Kingdom

AustriaGermany

Czech RepublicIreland

%

• Concentration of innovative performance across actors within countries is substantial

National patent concentration by top 10% of TL3 regions, average 2008-10

Source: OECD Regions at a Glance 2013

What are the impacts of structural changes on the concentration

of innovation activities?

Implications for for inclusive

growth

• Concentration of production in global value chains /quest for competitiveness

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On the Importance of Being “Selective”

• Successful growth trajectories of the past: Korea

• Not only technical innovation is valuable & benefit of wider-spread contributions

• ICT-based opportunities: networks/platforms and reduction in “fixed costs”

• Increased number of skilled individuals can access demand more easily

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Increased Value from “Democratising Innovation”?

The impacts of policies on inclusiveness depend on: Strategic Objectives and Outcomes

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Drivers of Policy Impacts on Inclusiveness?

Strategic Objectives impact on:

“Democratisation of innovation”

Concentration of innovation capacities

“Trickle down” mechanisms

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Source: Bas, M. and C. Paunov (2014), “The unequal effect of India’s industrial liberalization on firms’ decision to innovate: Do economic conditions matter?”, OECD Science, Technology and Industry Working Paper [forthcoming].

• Largest firms only benefits exceptionally from liberalization in less supportive environments

Economic

development Financial

development Knowledge and skills

base

High Low High Low High Low

Liberalization*Smallest firms -0.123 -0.056 -0.084 -0.043 -0.091 -0.067

(0.088) (0.051) (0.064) (0.076) (0.113) (0.048)

Liberalization*Largest firms 0.052 0.185*** 0.119 0.183** 0.073 0.177***

(0.091) (0.059) (0.074) (0.074) (0.121) (0.050)

Observations 7,597 8,610 8,277 7,930 4,792 11,415

R-squared 0.27 0.33 0.33 0.27 0.32 0.29

Business Conditions and Liberalization Effects on Indian Firms’ R&D Investments

Economic

development Financial

development Knowledge and skills

base

High Low High Low High Low

Liberalization*Smallest firms -0.123 -0.056 -0.084 -0.043 -0.091 -0.067

(0.088) (0.051) (0.064) (0.076) (0.113) (0.048)

Liberalization*Largest firms 0.052 0.185*** 0.119 0.183** 0.073 0.177***

(0.091) (0.059) (0.074) (0.074) (0.121) (0.050)

Observations 7,597 8,610 8,277 7,930 4,792 11,415

R-squared 0.27 0.33 0.33 0.27 0.32 0.29

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Business Conditions and Liberalization Effects on Indian Firms’ R&D Investments

• Largest firms only benefits exceptionally from liberalization in less supportive environments

Source: Bas, M. and C. Paunov (2014), “The unequal effect of India’s industrial liberalization on firms’ decision to innovate: Do economic conditions matter?”, OECD Science, Technology and Industry Working Paper [forthcoming].

• All economies face the policy challenge of growth that is socially inclusive

• Innovation can contribute to the solution, notably inclusive innovations & policy options exist

• Innovation policies impacts industrial and territorial inclusiveness

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Initial Conclusions

Caroline Paunov Dominique Guellec

Cynthia Lavison Isabel Vogler

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