SaraLawrence,MichaelHogan,AliceBrower,andStephanieZayed
GlobalPracticesforBuildingInnovationEcosystems
6/11/20 1
• Introductiontoinnovationecosystems• Lessonsfromnationalinnovationsystems• Indonesia’sinnovationeconomy• Nextsteps• Peercountryprofilesannex
2
TableofContents
IntroductiontoInnovationEcosystems
Whatisaninnovationecosystem?
Universities and research
institutes
Capital
Government and Public Agencies
Private sector
Support, services, and connectors
Culture, values, and
norms
Technology
Human Capital
Actors & Organizations
Foundation
An innovation ecosystem is a network of organizations and individuals with assets such as human creativity, business acumen, scientific discovery, and investment capital. These organizations and individuals come together to cultivate ideas so they can grow into vibrant enterprises and competitive industries that create positive societal and economic impacts.
Similar to a natural ecosystem in biology, a healthy innovation ecosystem is formed by the quality and frequency of the interactions of a community of people, companies and institutions.
Adapted by RTI from: The Rainforest: How to Create the Next Silicon Valley
InnovationEcosystemsareActiveNetworks• Ecosystemsaremuchmorethanacollectionof
organizations;theirvaluederivesfromtheirconnectivityandinteractions.
• Itisimportanttoviewinnovationecosystemsasacomplexnetworkoforganizationsandindividualswithhumancreativity,businessacumen,scientificdiscovery,andinvestmentcapitalassets.
• Healthyecosystemsinvolvecontinuousinteractionsbetweentheelementsofthisnetwork. Theseareoftendescribedas“nodes”or“collisions”.
• Whenthesecollisionstakeplaceandcoalescearoundideas,theycangrowintovibrantenterprisesandcompetitiveindustriesthatcreatepositivesocietalandeconomicimpact.
Universities and research
institutes
Capital
Government and Public Agencies
Private sector
Support, services, and connectors
Culture, values, and
norms
Technology
Human Capital
Actors & Organizations
Foundation
ConsiderationswhenBuildinganInnovationEcosystem§ Realizationthatthereisno“onesizefitsall”approach.
Customization isrequired.§ Stakeholdersacrossinstitutionalsectors (e.g.
government,academia,privatesector)andindustrialsectors(existingandfuturegrowth)needtobepartofthestrategy.
§ People arethesourceanddriversofinnovation.Astrategyhastofocusondevelopingtalentandconsumerswhoarepositionedtoparticipateandengageinaninnovationeconomy.
§ Asenseofurgencytoimpactpositivechangeisneeded,butalsoapatiencetounderstandthatinnovationforeconomicgrowthtakestime.Persistence isrewarded.
§ Innovationecosystemsarehighlydynamicandneedconstantattention.
BenefitstoIndustry,GovernmentandHigherEducationAninnovationecosystemstartswiththetriplehelixasabase:academia,privatesector,andgovernmentworkingincollaboration,oftenwithanimpartialintermediary,foracollectivevisionofeconomicdevelopment.Othersectorscanalsobeimportant(non-profit,environmental)expandingthedimensionsofthehelixdependingondevelopmentcontext.
Eachsectorbenefitsfromcollaboration,andtheecosystemcreatesoutputsgreaterthanthesumoftheirparts.
IndustryProductivity,exports,and
revenueSkilledworkforce
InnovationandnewproductsGlobalcompetitiveness
GovernmentImprovedexportsandtax
revenueSkilledworkforce
Improvedjobopportunitiesforcitizens
Globalcompetitiveness
AcademicIndustry-relevantcurriculumImprovedqualityofrelevant
researchScientificpublication
EmploymentforgraduatesAttractionofstudentsand
faculty
ReturnsonInvestmentintheInnovationEconomyResearchExpenditureandProductComplexity
Investmentsininnovationarecloselyconnectedtoeconomicgrowth.
HidalgoandHaussmann's“productcomplexityindex”(PCI)measuresacountry’sdiversityofproductionandspecializationofproducts,andisanaccuratepredictorofgrowthofGDPpercapita.
HigherlevelsofR&Dexpenditures(X-axis)arecorrelatedwithahigherPCI(y-axis),indicatingacorrelationbetweenresearchspendingandeconomicgrowth.
HowdoPolicymakersSupportInnovationEcosystems?Countriestendtoembraceanationalvisionforinnovationsupportedbyaportfolioapproachtopoliciesandinvestmentstofostermultipleecosystemcomponents.1. Createanationalpolicyorvisiontoaligneffortsaroundinnovation,whichincludesanoverarching
organizationtoeffectivelycoordinate governmentagenciesandharmonizepolicyandregulation.
2. Createpoliciesthatincentivizetheprivatesectoranduniversitiesto:• investinR&D,entrepreneurship,andbusinessgrowth• produceaninnovationreadyworkforcerangingfromresearchers,technicians,toconsumers• incentivizeuniversity-industrycollaboration• stimulateprivateandpubliccapitalformationtoinvestininnovation• locateinco-working,co-creationspacessuchasscienceparks,innovationdistricts,businessaccelerators,
orothersharedspaces.
SomeTacticalWaystoBuildanInnovationEcosystemHow do we create a culture of entrepreneurship that increases chances of long-term success?Foster Effective Entrepreneurship Programs
How do we better align university output with industry needs to produce market-ready technologies and job-ready graduates?Strengthen University-Industry Alignment
How do Small & Medium Enterprises with limited resources find and adopt technologies and processes so that they can grow and thrive?Drive Technology Adoption in SMEs
How do we produce a skilled workforce in in the right numbers and with the right qualifications to propel high-value industries?Develop an Innovation-Ready Workforce
How do we convert R&D investments into commercially valuable new products, processes and services?Accelerate Technology Commercialization
How do we know what’s working? How do we build on success? What should we invest in next?Assess Initiatives for Effectiveness & Impact
How do we match our innovation assets with sectors primed for rapid and sustained growth in global markets?Identify Industry Sectors for Growth
How can a government strengthen its policy tools to effectively foster growth in its innovation economy?Creating Policy Infrastructure for Innovation
HowdoCountriesFundInnovationEcosystems?• Likepolicies,fundinganinnovationecosystemrequiresaportfolioofinvestmentsinstrengtheningthebuildingblocks oftheecosystemandintensifyinginteractions.
• Humancapital,technology,andculturearethefoundationofaninnovationecosystem.Otheractorsandorganizationsserveastheassetsthatneedtobebuiltouttobolsterthefrequencyandqualityoftheintersectionswithintheinnovationrelatednetworks.
• TheWorldBanknotesthatthemostsuccessfulfundingprogramsarebasedinpartnershipsbetweenthetriplehelix—industry,universityandgovernment.
• Weprovideexamples ofhowcountriesfundecosystemcomponentsinthefollowingslides.
Universities and research institutes
Capital
Government and Public Agencies
Private sector
Support, services, and connectors
Culture, values, and norms
Technology
Human Capital
Actors & Organizations
Foundation
InvestmentsinHumanCapitalPeopledriveinnovation,nottechnologyorinstitutions.
Human Capital
§ Kenya’s ICT Authority created public-private and government to government partnerships to build ICT skills in graduates and existing workforce in the country. Some of these include:– CodePamoja: an ICT training program set up to promote ICT literacy
capacity, and innovation and enterprise development– Government of India’s Ministry of Telecommunication and IT:
Collaborate in public sector training for IT development and promotion of ICT investment, partnerships and market
– Huawei Technologies Co. Ltd: Collaboration through internship mentorship and training programs for engineering students, provision of technical infrastructure to academic institutions, among others.
– Oracle Technology Systems Ltd: Collaboration through IT skills development programs and initiatives, internship and mentoring opportunities
§ The ICT Authority budgeted $26.6 million for its ‘Human Capital’ activities in its Strategic Plan 2013-2018
IT&BroadbandInternetaretheenablinginfrastructureforaninnovationecosystem.
InvestmentsinInformationTechnologyInfrastructureIT Infrastructure
• SouthKorea’stechnologyinfrastructurehasdramaticallyadvancedinthelast20years.
• In1990,.02%ofthepopulationwereinternetusers,by201590%ofthepopulationusedtheinternet.
• Broadbandspeedsarethefastestintheworld(TechnologyInquirer).
• SouthKoreahasinvestedintechnologyinfrastructuresincethe1987FrameworkActonInformatizationPromotion,ahighlyambitioustechnologydevelopmentplan.SincetheAct,SouthKoreahasspentmorethan5billiondollarsonconnectivityefforts.
• MostofSouthKorea’sinvestmentsarejointventureswiththeprivatesector.In2003,theKoreangovernmentjointlyinvested2.1billiondollarswithmobilecarrierstoupgradethethe nation’smulti-medianetwork(Telegeography).Morerecently,1.5billiondollarswerepledgedtoleadSouthKoreato5Gmobilestandardsby2019.
Source:TheDailyStar
InvestmentinCulture,ValueandNormsAninnovativeculturesetsnormsthatfostertrustamongactorsandsupportsrisktaking.
Culture, values, and
norms
• Malaysia’sGlobalInnovationandCreativityCentre(MAGIC)createsarisk-taking,entrepreneurialculturethroughitfullsuiteofprogramsandbyhostingfrequentpubliceventsandmeetingstocelebrateandpromoteentrepreneurship.Someofitsprogramsinclude:
• Mentorship—youngpeopleareconnectedwithskilledentrepreneurstogrowandlearnfromtheirexperiences.
• GlobalAcceleratorProgram—Buildsacommunityofstart-upsbytargetingassistanceto80newstart-upstogettheminvestmentready.
• SocialEnterpriseVenture—Capitalfundforsustainableyouth-drivensocialprojects.
• ImpactDrivenEnterprises—Inspiresbusinessestobecomeaforceforgoodbyprovidingaccreditationtoimpactdrivenenterprises,allowingthemaccesstonewmarketsandcapacitydevelopmentprograms.
InvestmentsinSupportServicesSupportserviceproviderssuchasbusinessaccelerators,entrepreneurshiporganizations,scienceparks,orclusterorganizationscreatestructureandmechanismstoconnectwithintheinnovationecosystem.Support Services
China’sZhongguancun ScienceParkbringstogetherresearchuniversities,labs,manufacturingfacilities,businessservices,andcorporateheadquarterstoattractentrepreneursandinnovators.
• Techentrepreneurshaveeasyaccesstobusinessservicesthroughincubatorsandaccelerators
• LocaluniversityresearchershaveaccesstoSMEsandlargebusinessestoconductappliedresearch.
• In2017,ExpertMarketnamedBeijingastheworld’stoptechhub,ledbytheZhongguancun district’sboomingstartupscene.
InvestmentsinCapitalAccesstocapitalistheentrywayforentrepreneurswithviableinnovationstoreachmarketpotentialtoaidinproductionandexpansion.
Capital
• ThemissionofChile’sEconomicDevelopmentAgency(CORFO)istotransformChileintoaglobalinnovationandentrepreneurialhub.
• CORFOhasanearlystageventurecapitaltechfundthatconnectsentrepreneurswithinvestors.
• CORFO’hasseena35percentincreaseinpublicfinancingforthefund.
• Malaysia’sCradlefundmissionistocreateastrong innovationecosystemthatsupportsthedevelopmentofnewideasandrepresentsthegovernmentsefforttoincreasethequantityandqualityofinnovations.
• IncorporatedundertheMalaysianMinistryofFinancein2003• Inthepast13years,Cradlehasfundedover700Malaysiantechstartups• CradleSeedVenturesestablishedin2015toexpandthefund’sportfolioto
equityinvestment.
Cross-EcosystemInvestmentsPrivate sector
Human Capital
STRIDEistheU.S.government’slargesthighereducationprojectinthePhilippines.The5-yearprojectstrengthsthePhilippinescapacityforinnovation-ledinclusivegrowththroughbolsteringhumancapacitydevelopmentinscience,technologyandinnovation(STI)andstrengtheningappliedresearchcapabilitiesinthePhilippineuniversitiesandindustry.
• 189industrypartners,109academicpartners• 30innovationworkshopswith1,923participants• 89guestindustrylectureswith56differentspeakers• 93facultyexternshipsat14hostscompanies• 7knowledgeandtechnologytransferofficeworkshopsengaging39universities• $5.5MUSDresearchgrantsawardedfor68R&Dprojects,35withdirectlinksto
industry
CrossEcosystemInvestmentsGovernment and Public Agencies
Private sector
Support, services, and connectors
TheNationalInstituteofStandardsandTechnology’sHollingsManufacturingExtensionPartnership(MEP)intheUnitedStatesworkswithSME’stohelpthemcreate/retainjobsandgrowrevenue/profits.Theprogramaddressesthefollowingchallenges.
• SMEsmayhavecostlyprocessissuesthatcanbesolvedwithnewtechnologies
• SMEsneedtodeterminewhethertoinvestresourcesinanewidea,product,orcapability.
Universities and research
institutes
Government and Public Agencies
Private sector
CrossEcosystemInvestments
InDecemberof2014,theSaudiArabiaAdvancedResearchAlliance(SAARA)waslaunchedtodriveinnovationandtechnologycommercializationthroughouttheKingdom.SAARAisa“first-of-its-kind”coalitionbetweentheprivatesector,academiaandgovernmentagenciesengagedinS&T/innovation.
Universities and research
institutes
Private sector
Human Capital
CrossEcosystemInvestments
AdvancedFunctionalFabricsofAmerica(AFFOA)isa$317MUSDmillionpublic-privatepartnershipdesignedtoaccelerateinnovationinhigh-tech,U.S.-basedmanufacturinginvolvingfibersandtextiles.Theprogramfocusesonbothdevelopingnewtechnologiesandtrainingtheworkforceneededtooperateandmaintaintheseproductionsystems.Itincludesanetworkofcommunitycollegesandexpertsintechnicaleducationformanufacturing.
• Partnershipincludes32universities,16industrymembers,72manufacturingentities,and26startupincubators,spreadacross27statesandPuertoRico.
• $75MUSDfromtheU.S.DepartmentofDefenseismatchedwithfundingfromindustrialpartners,venturecapitalists,universities,nonprofits,andstates.
LessonsfromNationalInnovationEcosystems
LessonsLearnedGlobally,thereisno“onesizefitsall”approachor“quickfix”forcreatinganinnovationecosystem.Itrequiresalong-termvisionandacoordinated,intentionaleffortacrossinstitutionsandagencies.Aswereviewedthepathsothercountrieshavetaken,weidentifiedsevencommonpracticesthatsupportimplementingthatlong-termvisionandcoordinatedeffort.1. Establishacoordinatingorganization
2. Setinnovationplansandsticktothemovertime3. Investineducation4. InvestinR&D
5. Strengthenuniversity-industrypartnerships6. Haveanindustrysectorfocus7. Createplacestoinnovate
Wereviewedoverarchingpoliciesandprogramsfromsevenpeercountries:Malaysia,Vietnam,SouthKorea,Kenya,Mexico,thePhilippines,andVietnam.
InnovationEcosystemsareaLong-termEffortTheyrequirevision,investment,andcoordinatedintentionaleffortacrossinstitutions
• Aninnovationecosystemistheresultofmultiplepolicies,programs,andactionsimplementedovertime.
• Theyrequirecoordinationandinvestmentsacrossinstitutions,actors,andagencies.
• Thereisno“silverbullet”forcreatinganinnovationecosystem.Aportfolioofpoliciesandinvestmentsbuildandstrengthenecosystems.
• Successfulecosystemshavealong-termvisionandrequiresustainedinvestmentfrompublicandprivatesources.
Example:Long-Term,Multi-FacetedApproachSouth Korea’ssuccessasaninnovationeconomydatestothe1960s,whenitsmanufacturingfirmsbegantomovefromOEMproductionformultinationalstothecreationandadoptionofdomesticallydevelopedtechnologies.
• LeadershipoftheMinistryofScienceandTechnologyandKoreanInstituteofScienceandTechnology,foundedin1960s.
• Skilledlaborforce,strongR&Dspendingfromprivateandpublicsectors,andconsistentreformstothebusinessclimatehelpedthecountryremaincompetitive.
• Infinancialcrises(1997,2008),KoreanfirmscontinuedtoinvestinR&D.
Source:OECDReviewsofInnovationPolicy:Korea.2009SouthKorea’smulti-facetedapproachtoinnovationecosystemsledittogofrom“catchingup”withglobalcompetitorstobeingagloballeaderininnovation.
1:EstablishaCoordinatingOrganization
• Coordinatingorganizationsoverseethedevelopmentandpromotethegrowthofthenationalinnovationecosystem.
• Additionally,centralcoordinatingbodiespromotecommunicationbetweenscience,industry,governmentandeducationleaders.
Embracinginnovationasameansofeconomicgrowthoftenentailsanewwayofworkingforgovernment.Supportinginnovationdoesnotfitneatlyintooneagency’spurview.Itcrossesmanyfunctionsandtouchesmanyorganizations.Coordinatingagencieshelpsetthesharedvision,facilitatecollaborationamongdifferentorganizations,andmitigateany“turfwars”amongexistingentitiesthatmaystymieprogresstowardslargersharedgoalsforeconomictransformation.
Innovationecosystemsarecomplexandinvolvemultipleactors.Acoordinatingorganizationhelpstofacilitatetransactionsandsupportthefoundation.
Examples:CoordinatingOrganization
§ Korea’sNationalScienceandTechnologyCommissionwasreconstitutedin2011asacoordinatingagencywithresponsibilityfornationalSTIpoliciesandallocationofpublicR&Dfunding
§ Mexico’s 2002S&TlawestablishedtheNationalCouncilforScienceandTechnology(CONACYT),whichallocatesfundstowardskeysectorsandappliedresearchandisthecountry’sS&Tentity
§ KenyacreatedNationalCommissionforScienceTechnologyandInnovation(NACOSTI)in2013tosupportthecountry’semphasisonastrongfoundationofST&IinitsVision2030.Thecommissionhasadvisory,regulatory,coordinatingandpromotingroles.Itbudgeted$24.3millionUSDinits2014-2018StrategicPlan.
2:SetInnovationPlansandSticktoThem
• Onceplansarecreatedandfollowed,wealsoobservethatgovernmentsreviewprogress,andevery5–10yearsrefreshtheplanstoadapttocurrentneeds,opportunitiesandtheeconomicclimate.
• Thedistinctionbetweencountriesthatcreateplansandthecountriesthatmakeprogresstowardstheplansgoalsispoliticalwill.Leadershipfromthehighestlevelssendsignalsabouttheimportanceofinnovationandthecommitmenttothislong-terminvestment.
• CountrieslikeSingapore,Malaysia,CostaRica,Korea,Rwanda,andChinahavedemonstratedpoliticalwillsetandcommittoaninnovationdriveneconomy.Whenleadershipisnotfullycommittedinvestmentsandsupportbecomeerraticresultinginmany“stops”and“starts”andmakingitdifficulttoseedsystemslevelinvestmentsandchange.
Innovationcrossesinstitutionalandindustrysectorsandisleverageddifferentlyforeconomicdevelopmentdependingongeographyandthekindsofpeopleparticipatingintheinnovationeconomy.Toaddresstheseissuesinawholesaleway,manycountriescreatenationalinnovationplans.Moreimportantlycountriesactivelyandintentionallyfollowtheirplansbycommittingtotheideas,goals,andtargetstheyestablish.
Inthelast6years,morethan50countrieshavelaunchedNationalInnovationPlans
2:SetInnovationPlansandSticktoThem(continued)
Examples:SettingInnovationPlansandStickingtoThem• Malaysia: aimstobeahighincomecountryby2020.Ithasbeentargetinggrowthtowardsinnovationfor44years.
– FoundingofMOSTI(1973)– Vision2020(1991)– FirstR&Dbudgetestablished(1990s).– R&Dfundingdoubledfrom0.6%ofGDP(2006)to1.3%(2014)andtheyareaimingfor2%by
2020.– TenthMalaysiaPlan(2011)– EleventhMalaysiaPlan(2016)
• Vietnam: hasa2035report– BuildingNationalInnovationCapacity
• Focusonimprovingproductivity,investmentenvironment,andR&Dspendingbyprivateactors
• Focusonuniversity-industrylinkagesandrelevanceofskillsinlaborforce
3:InvestinEducation
• Investingineducationpreparesworkerstotakeadvantageofjobopportunitiesinaninnovationeconomyanditpreparedconsumerstotakeadvantageofproducts,services,andprocessesthatcangreatlyenhancebasicqualityoflife.Further,researchindicatesthataneducatedworkforceisoftenoneofthemostimportantingredientsthatcreatesanattractiveclimateforinnovativecompaniestostart,grow,andlocate.
• Withbusinessandotherorganizationsgrowinginaninnovationeconomy,therearemoreopportunitiesthatenticelocaltalenttostayincountry,mitigating"braindrain".
Peoplearetheinnovatorsofaneconomy—nottechnologyorinstitutions.Investingineducatingandtrainingpeopletoparticipateinaninnovationeconomyisthemostimportantinvestmentacountrycanmaketobuildoutitsinnovationecosystem.
Examples:InvestinginEducation
• Philippines hasworkedtoraisethequalityofhighereducationinstitutionssinceearly1990’sbyraisingthequalityofcurrenthighereducationinstitutionsinsteadofbuildingmoreandsupportinggraduatescholarshipstoincentivizeandrewardresearchundertakingsandoutputsfromUniversities.
• Vietnam hasthehighesteducationexpenditureamongASEANcountries.Overthepast10years,ithasbeensuccessfulinexpandingaccesstotertiaryeducation.BoththeHigherEducationReform(2005)andtheHigherEducationLaw(2012)setambitiousgoalsforraisingcapacity,quality,andefficiencywhilegivinghighereducationinstitutionsgreaterautonomy.
• Enrollmentsincreased57%between2005to2012• FacultymemberswithPhDsincreasedby54%between2005and2012
4:InvestinResearchandDevelopment
• InvestinginR&Disakeycomponentofanationalinnovationecosystem.• SouthKorea,KenyaandMexicohaveeachsetgoalstoincreasethepercentofGDPinvestedinR&D.• Manycountriesaimtoinvest2.0%ofGDPforinnovation.15countriesareinvestingatthisbenchmarkasof2014.
• Ideallythereisablendoffundingfromboththepublicandprivatesector.Typicallythepublicsectorisaninvestorinearliermoreriskyresearchwhichtheprivatesectorinvestsinmoreappliedresearch.
Peoplearoundtheworldarelookingforwaystoimprovetheirlivesthroughbetterproducts,services,andprocesses.R&Distheprocessbywhichnewideasevolveintoproducts,services,andprocessescanreachmarkets.Itisalsothemechanismthatcountriesusetounleashlocaltalentandhelpthembecomeinnovators.
Examples:InvestinginR&D
• SouthKorea:R&Dexpenditurewentupfrom 0.25%ofGDPin1963to2.8%intheearly1980s,andinvestmentqualityimprovedenormously.Itisnowaworldleaderwith4.3%ofGDPinvestedinR&D.
• Kenya: ResearchFundhasbeenestablishedundertheNationalCouncilforScienceandTechnologyin2013.Theinitialallocationforthefundwasof$2.43millionUSD,whichincreasedto$4.83millionUSDforthe2015-2016fiscalyear.Itfundsmulti-disciplinaryprojectsinlinewiththecountry’snationalpriorities.
• Mexico: The2014-2018ProgramforScience,Technology,andInnovationsetsgovernmentfundingforSTI,withagoalofR&Dreaching1%ofGDPby2018(0.54%in2014)
5:StrengthenUniversity-IndustryPartnerships
• Strengtheninguniversity-industrypartnershipscanlimitbraindrain,traintheworkforcetomeetimmediateemploymentdemands,andalignresearchtowardsviablecommercializationopportunities.
• Incentivesorwaystoencouragecollaborationtakemanyformsbutcaninclude:• JointR&Dgrants/investments• Curriculumdevelopment• Internships/externships• Professionalsabbaticalsincompanies• Sharedspacesthatattractbusinesspeopleandacademicstothesamelocation,suchasresearch
parks,incubators/accelerators,sharedlaboratories,innovationdistricts.
Universitiesandindustryoftenareawkwardpartners.Theyoftenlacktheexperience,cultureandnormsforhowtoworktogethereffectivelytowardsmutuallybeneficialoutcomes.Universitiesandindustrytendtoworktodifferenttimelines,outcomesandpurposes.Yetwhenpairedtogethertheycreateapowerfulsynergisticcombinationthatcanacceleratethedevelopmentofaninnovationdriveneconomy.
Examples:University-IndustryPartnerships
• Kenyaisfocusingonstrengtheninguniversityandindustrylinkages,particularlythroughexternship-likeopportunities.
• Itisalsolinkingindustrytotrainingwithpolicygoalsto:
• Place10,000studentsonindustrialattachment.
• Train5,800studentsinindustrialskills.• Examineallindividualswhoregisterfortradetestexams. Since2007,university-industrycollaborationinR&D
increasedfrom3.22to4.22intheWorldEconomicForumexecutiveopinionsurvey,alongwithanincreasedperceptioninthecapacityforinnovation
6:HaveanIndustrySectorFocus
• Potentialforimpactcanrefertomanykindsofeconomicdevelopment—futureglobalcompetitor,impacttolocalvaluechainandthusmanyassociatedbusinesses,impacttoworkersorconsumers(e.g.improvedagriculturalyieldsorhealthcareservices).Itisadvisabletodevelopastrategybehindthetargetindustrysectors.
• ThePhilippines,Kenya,Malaysia,andMexicohavedevelopedspecificindustryprogramsandpolicieswithintheirinnovationstrategiestofocusgrowth.
• Korea,Taiwan,Japan,andSingaporefocusedonindustrysectorsforgrowthaspartoftheireconomictransformationinthe1990’s.
Innovationecosystemsisasprawlingconcept.Itcanbedifficultfordecisionmakerstofocushowtobestinvestintheecosystemforeconomictransformation.Onewaygovernmentstargetinnovationinvestmentsistoidentifyasubsetofindustrieswiththemostpotentialforeconomicimpactthroughinnovation.Thiscanprovideaframeworktohelpgovernmentsprioritizeinvestmentsandcoordinatingactivities.
Example:IndustrySectorFocus• Kenya: Vision2030hasafocusoninnovationtodrivethedevelopment
ofaformalICTindustrysector.Thegovernmentcreated micro/SMEcentersofexcellenceledbytheMinistryofMiningtofocusresearch.
• Mexico:NationalCouncilforScienceandTechnology,foundedin2002,alignedgovernmentS&Tfundstowardskeysectorsforgrowthinthecountry.Itallocatedfundstowardskeysectorsandappliedresearchsuchassustainableenergy,agriculture,andtechnologicaldevelopmentinenergy,amongothers.
• Malaysia:Somesector-specificpublicfundsincludetheScienceFund(nanotechnology),BiotechnologyR&DGrantScheme(coveringAgro-Biotechnology,PharmaceuticalandNutraceutical,andGenomicandMolecularBiology)
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Lesson7:CreatePlacestoInnovate
§ Thetypesofplaces thatcountriescreateforinnovationhaveevolvedoverthepast20years.Theyincludearangeofoptions,suchasscienceandtechnologyparks,innovationdistricts,andinnovationhubs.
§ Spacesforinnovatingcanincludeco-workingorsharedspacesandbusinessincubatorsoraccelerators.
§ Innovativeplacestendtobedense,multi-purpose,andmixedusetoensuredifferenttypesofpeoplearefrequentingthelocation.
Innovationrequiresnewgeographiesandphysicalspacestoflourish.Placestothatfosterwaysforideasandpeopletocollideunexpectedlyareideal.Countriesandcitiesseektocreateplacesandspacesthatareaccessible,attractpeoplewithdiversebackgrounds,andhaveactivities/eventsthatbringpeopletogether.
Examples:CreatingPlacestoInnovateKenyaandthePhilippineshaveinvestedinbuildinginnovationhubstoacceleratethegrowthoftheirecosystem.§ Philippines:investedinbuildingitsinnovationinfrastructurebyfundingtheestablishmentofinnovationhubsinstrategiclocationsinthecountrywithvaryingindustryfoci.Withdevelopmentgoalsofpromotingandacceleratingtechcommercializationandutilization;theseinnovationhubswillmakeresources(assetsandcapital)availableforstartupsandMSMEs.
• Kenya: CreatedtheiHub inNairobiandiscurrentlydevelopingKonza TechnologyCity,asmartcitythatwillbecomethecountry'shubforeducation,lifescience,andtelecom
• MalaysiaestablishedTechnologyParkMalaysiain1996• ICT,EngineeringandBiotech,Telecommunicationsclusters• 241productshavebeenlaunched,22intellectualpropertyregistered,861incubateshavereceivedincubationservices.
Indonesia’sInnovationEconomy
BenchmarkingIndonesia’sInnovationEconomyCountry-levelindicatorsofinvestmentandoutputofinnovationcanprovideinsightsintohowacountryisperformingovertimewhencomparedtopeers.
RTItrackedindicatorsacrossfivecategories(seenextslide)forIndonesiaandsixpeercountries(Kenya,KoreaMalaysia,Mexico,Philippines,&Vietnam)togiveanoverviewoftrendsininnovationandeconomicgrowth.
Benchmarkingisafirststepingaugingprogressincreatinganinnovationeconomy.Itisnotintendedtoprescribeacourseofaction.
Economictransformation
Humancapital Researchinputs Ideaflows Entrepreneurship
BenchmarkinganInnovationEcosystem
EconomicTransformationMovementto highervalue-added,innovativeproducts,processes,andservices• GDPpercapitagrowth
HumanCapitalEducated workforceinresearchandtechnicalfields• Post-secondaryenrollment,globalpatentfiling
ResearchInputsInvestmentinR&Dandinfrastructure forcommercialization• R&Dspending, densityofresearchers,scientificpublication
IdeaFlowsOpennesstosharingglobalideas• Internet users,globalpatentfiling
EntrepreneurshipCreationofnew,innovative enterprises• Newbusinessesregistered
RTItracks5categoriesofcountry-levelmetricstounderstandinnovationecosystems.
EconomicTransformation:GDPPerCapitaGrowth
Indonesia’sGDPpercapita,anindicatorofthegrowthoftheeconomy,remainsrelativelylowcomparedtopeers,and,inrealterms,declinedfrom2011to2015aftersharppost-recessiongrowth.
Economicgrowthoverthepast20yearswasprimarilytheresultofnaturalresourceexportsandgoodtradelinkswithglobaleconomies.
HumanCapital:Post-SecondaryEnrollmentEnrollmentinpost-secondaryeducationisoneindicatorofthehumancapitalcapacityinacountry.• Indonesia’senrollmenthasincreasedfrombelow15%ofalleligiblein2000to31%in2014,nearlydoublingoverthetimeperiod.
• ItsincreaseisinlinewithotherpeersincludingthePhilippines,Vietnam,Mexico,andMalaysia
• Koreaconsistentlyenrollsover90%ofitsstudentsinpost-secondaryeducation.
HumanCapital:ScientificandTechnicalPublication
OutputofscientificandtechnicaljournalarticlesgivesarelativemeasureoftheoutputsofR&Dandthehumancapitalavailable.• Indonesianresearcherspublishednearly3,000 articlesin2013,showingincrementalgrowthoverafiveyearperiodandoutperformingsomeregionalpeers.
• Overthesameperiod,Malaysianoutputnearlytripled,toover17,000scientificjournalarticlespublished.
ResearchInputs:R&DSpendingasaPercentofGDP
R&DspendingasapercentofGDPcapturespublicandprivateinvestmentsininnovation.
Indonesia,likeVietnamandthePhilippines,hasfewresourcesdedicatedtoR&D.Indonesiainvests0.08% ofitsGDPandmostofitcomesfromgovernment.
RegionalcompetitorssuchasMalaysia(1.2%)andglobalpeersincludingMexico(0.5%)arededicatingmoreresourcestoR&Dtocompeteintheglobaleconomy.GloballeaderslikeSouthKoreaspendupwardsof4%ofGDPonR&D.
GlobalPatentFilings
GlobalpatentfilingsthroughthePatentCooperationTreaty(PCT)areanindicatorofintellectualpropertyoutputandglobalimpactoninnovation.PatentfilingsinIndonesiaandregionalpeersareincreasing.
• Indonesianpatentfilingsincreasedfrom2000to2014,from157to702,anincreaseof347%.
However,theyarefarbelowregionalandgloballeaders.
• Overthesametimeperiod,SouthKoreanPCTfilingsincreasedtoover164,000.
ResearchInput:HumanCapitalDedicatedtoR&D
ThedensityofhumancapitaldedicatedtoR&D,measuredbyresearcherspermillion,isanindicatoroftheresourcesavailableanddedicatedtoresearch.
• In2009(mostrecentyearavailable),Indonesiahad90 researcherspermillionpeopleinR&D,adeclinefrom213in2000.
• Overthesametimeperiod,researchersinMalaysiaincreasedfrom274permillionto1,070(nearly4xincrease),andby2014reached2,052 (7.6x thedensityofresearchers)
• In2014,SouthKoreahadnearly7,000researcherspermillion
IdeaFlows:InternetUsers
Internetusersisoneindicatoroftheconnectionandflowofideasinacountry.
Lessthan26% ofIndonesiansusedtheinternetin2016,farbehindVietnam(46%),thePhilippines(55%),andMalaysia(79%).
UseoftheinternethasincreasedinIndonesiaoverthepasttenyears,butataslowerpacethaninneighboringandpeercountries.
Entrepreneurship:NewBusinessesRegistered
Numberofnewbusinessesregisteredperyearisameasureoftheeaseofdoingbusinessinacountry,aswellastheentrepreneurialculture.
From2004to2012thenumberofnewbusinessesregisteredinIndonesiaincreasedby57%.Globalandregionalpeerssawsimilarincreasesinnewbusinessoutput.
Businessgrowthisaidedbyimprovementoftheeaseofstartingabusiness,whichtookanaverageof24.9daysin2016.Thisisanimprovementfromanaverageof164daysin2005.
DataTakeawaysforIndonesia• Indonesia,amiddle-incomeeconomy,historicallyexperienced
economicgrowthfromnaturalresourceexportsandgoodtradelinkswithglobaleconomies.
• GDPpercapitaremainsrelativelylowandGDPgrowthhasslowedcomparedtopeers.
• Additionally,Internetadoptionisslowandlagsbehindthatofpeers.
• Thecountry’sinvestmentinR&Dislow,atlessthan0.1%,andmostofitcomesfromgovernment.Likewise,thegovernment’sexpenditureoneducationandhighereducation,whileexpandingovertheyears,isstilllowcomparedtosomeofitsneighbors.
• Thoughstillatanearlystage,theinnovationsysteminIndonesiashowspotentialinincreasedpatentoutputsandentrepreneurship.Ayoungandgrowingpopulationandimprovingbusinessclimatecanhelptransforminvestmentsintoeconomicgrowth.
KeyfiguresGDPGrowth2015-2016:
5.0%Grossenrolmentratio,tertiary,2014:
31.1%Patentapplications,residents,2014:
702%pop.usingInternet,2016:
22.0%FDI(netinflows%ofGDP),2016:
2.3%R&DExpenditure(%ofGDP),2014:
0.1%Timerequiredtostartabusiness
(days),2016:24.9
DataSummaryTableCountry GDPPerCapita
(PPP)GDPpercapita
growthTertiary
enrollmentratioResidentpatentapplications
5YearPercentchangeinpatentapplications
PercentofpopulationusingtheInternet
R&Dexpenditure(%ofGDP)
FDI,netinflows(%ofGDP)
Timerequiredtostartabusiness
(days)GIIRanking
Indonesia $11,126 3.5% 31.3% 702 69% 25.4% 0.09% 0.4% 24.9 87
Philippines $7,254 4.2% 35.7% 334 94% 55.5% 0.14%* 2.6% 28 73
Malaysia $26,314 3.5% 29.7% 1,353 10% 78.7% 1.26%* 3.7% 18.5 37
Vietnam $6,024 5.5% 30.5% 487 89% 46.5% 0.20% 6.1% 24 47
SouthKorea $36,511 2.2% 95.3% 164,073 29% 92.7% 4.30% 0.8% 4 11
Kenya $3,207 2.9% 4.0% 132 175% 26.0% 0.79%** 2.2% 22 80
Mexico $17,534 1.2% 29.9% 1,246 51% 59.5% 0.54% 2.6% 8.4 58
Year 2017 2015 2014 2014 2009-2014 2016 2014 2016 2016 2017
Source:WorldBankWorldDevelopmentIndicators,WIPO,UNESCO,GlobalInnovationIndex2017*2013**2010
NextSteps
TheNeedforIndonesiaChallenge• Thereisaweakfoundationtosupportaninnovationdriveneconomy• Thefragmentedpolicyenvironmentexacerbatestheweaklinksanddisconnectswithintheemerginginnovationecosystem.
OpportunityGiventhathumancreativity,knowledgeanddrivearethemainsourcesforinnovation,Indonesia’ssignificantyoungpopulationcandriveanew-foundinnovationeconomy.
Indonesia’sOpportunityToharnessitspotential,Indonesiawillneedtodotwothings:1. Investandbuilduptheinnovationbuildingblocksforaninnovationinfrastructure.
• IndonesiawillneedtoinvestinR&D,education,university-industrypartnershipsandcreateplacestoinnovate.
2. Setapolicyenvironmentforinnovationsystemstothrive.• Indonesiawillneedtosetaninnovationplanandsticktoit,establishcoordinatingorganizations,andhavean
industrysectorfocus.
Innovationecosystemsflourishinenvironmentswheresynergiescanbecreatedandnetworksreinforcedthatlinkinnovators,entrepreneurs,workers,finance,business,governments,andmarkets.Thecountrywillneedtoalignlaws,ministrybudgets,andactionsbygovernmentanduniversitiestowardthesamegoalsanddirectionsofthenationalinnovationagenda.
NextStepsWeidentified6nextstepsforIndonesiatoembarkonitsnextphaseofbuildingitsinnovationecosystem.1. MaptheInnovationEcosystem2. AssesstheInnovationEcosystem3. AssessInnovationpolicyEnvironment4. IdentifyIndustrySectorsofFocus5. AssesthePoliticalEconomy6. DetermineInstitutionalCapacity
Manyofthesestudiesmayalreadybecompleteorembeddedwithinexistingreports.WerecommendcompilingtheinformationaccordingtothesesixcomponentstobetteroutlineacohesiveandactionableplanningapproachtobuildingIndonesia’sinnovationecosystem.
NextStep#1:MaptheInnovationEcosystemWhatinnovationassetsdoesIndonesiahaveacrossitsinnovationecosystem?
• Whatkeyinstitutionscomprisetheactorsandorganizationsoftheinnovationecosystem(outerringofthediagram)?
• Howwouldyoudescribethestatusofthefoundation oftheinnovationecosystem(innercircle)?
• Statusandqualityofworkforce?• Appetiteforrisktaking?Opennesstonewwaysofworking?
Leveloftrustorexperienceofgovernment,university,andindustryinteractions?
• Whatprogramsorinitiativessupportorconnectcomponentsoftheecosystem?
• Whoarethemainconnectorsandchampionswithintheecosystem?
Howwellarethecomponentsoftheecosystemconnecting?
Universities and research
institutes
Capital
Government and Public Agencies
Private sector
Support, services, and connectors
Culture, values, and
norms
Technology
Human Capital
Actors & Organizations
Foundation
NextStep#2:AssessInnovationEcosystem• Arethereinnovationassetsinplacethatcomprisetheecosystem?
• Ifpresent,whatisthestatusoftheassetsintermsofitsabilitytooperateinaninnovationeconomy?
• Ifassetsarestrongwhataretheplansandstrategiestoreinforcethem?
• Whatassetsaremissing?Orwhataretheweaklinkswithintheecosystem?
• Whatareareasforpriorityinvestmentstoestablishorstrengtheninnovationassets?
• Whatareprogramsorincentivestofacilitatejointcollaborationandinteractionamongmembersoftheecosystem?
Universities and research institutes
Capital
Government and Public AgenciesPrivate sector
Support, services, and connectors
Culture, values, and norms
Technology
Human Capital
Actors & Organizations
Foundation
NextStep#3:AssessInnovationPolicyClimate
OverarchingQuestionstoaddress:• Whatpoliciesarereinforcingtheecosystem?
• Whatpoliciesarebottleneckingtheinnovationecosystem?
• Whatpoliciesaremissing?• Whatpoliciesneedtoberemovedormodernizedtosupportaninnovationeconomy?
Universities and research
institutes
Capital
Government and Public Agencies
Private sector
Support, services, and connectors
Culture, values, and
norms
Technology
Human Capital
Actors & Organizations
Foundation
NextStep#4:DetermineIndustrySectorFocus• WhichindustriesarebestpositionedinIndonesia?
• Forcompetitiveeconomicgrowthregionallyorgloballythroughinnovation• ForeconomicbenefitorimpacttoIndonesianhouseholds,workers,andcompanies
• Whatarethetop3– 5sectorsforfocusattheoutset?• asthesystemstrengthensandadjacentsectorsbegintobenefitthroughinnovationconsiderrefreshingand/orexpandingindustrytargets
NextStep#5:AssessthePoliticalEconomy
• Whatisthepoliticalappetiteforinvestingandimplementinginnovationrelatedprograms?
• Whataretheinstitutionsandleadersmostlikelytochampionandpressfornecessarychangestoorienttheeconomyandsocietytowardsinnovation-basedapproaches?
• Canyouanticipatebottlenecksanddevelopstrategiestoaddress?
NextStep#6:AssessInstitutionalCapacity• Isthereanorganizationthatcanserveasanoverarchingcoordinatingbody?
• Canitcollaborateeffectivelyacrossgovernment,universitiesandbusiness?
• Ifno,howcananorganizationbeestablishedtoservethisrolewithauthoritytocoordinate,overseeandsetavisionforIndonesia’sinnovationecosystemwithoutoversteppingintotheworkofother’sintheecosystem?
NextSteps:Conclusion• ThesenextstepsareintendedtosetaframeworkforhowIndonesiacanadvancethedevelopmentofitsinnovationecosystembasedonexperiencesofothercountries.
• Manyoftheseassessmentsmayalreadybecompleteorareunderway.
• Wesuggestcompilingthisinformationinoneplacetosetaclearvisionforthecountry;prioritizeinvestments;andalignorganizationsandpoliciestosupporttheprogramsthatwillbeimplemented
• Asyouundertaketheseassessments,youmaylearnofrelatedquestionsortopicsthatwillbeimportanttounderstand.ThenextstepsinthisdocumentaremeanttobeareferencepointsodecisionmakerscanbestdeterminewhatiswellestablishedandwhatmayneedmoreclarityasIndonesiabuildsitsinnovationecosystem.