11

East Asian Economy: KBE and Innovation in East Asia

* Some parts of this note are borrowed from the references for teaching purpose only.

1

East Asian Economy <Lecture Note 8> 2013.12.5

Semester: Fall 2013 Time: Thursday 2-5 pm Professor: Yoo Soo Hong Room: 423 Mobile: 010-4001-8060 E-mail: yshong123@gmail.com Home P.: http://yoosoohong.weebly.com

2

Knowledge (Innovation) Based Economy

3

Emerging Knowledge Economy

Increased generation/codification of knowledge (e.g., patents granted in the US: from 49,971 in 1963

to 175,983 in 2000)

Closer links with science base/increased rate of innovation/shorter product life cycles

Increased importance of education, up-skilling of labor force, and life long learning

Growing investment in intangibles (R&D, education, brands…) – OECD countries spend more than

$520 billion per year in R&D

Value added increasingly associated with investment in intangibles such as branding, marketing, lo-

gistics/information management

Innovation and productivity increase more important in competitiveness and GDP growth

Increased Globalization and Competition

Constant change and competition implies the need of constant restructuring and upgrading: the ability

to create, access and use knowledge is becoming the fundamental determinant of global competi-

tiveness.

4

0

2

4

6

8

10

12

14

1960 1965 1970 1975 1980 1985 1990 1995 2000

K n o w le d g e m a k e s th e D if fe r e n c e K n o w le d g e m a k e s th e D if fe r e n c e b e tw e e n P o v e r ty a n d W e a lth . . .b e tw e e n P o v e r ty a n d W e a lth . . .

R e p . o f K o r e a

G h a n a

T h o u s a n d s o f c o n s ta n t 1 9 9 5 U S d o lla r s

D if fe re n c e a t t r ib u te d to k n o w le d g e

D if fe re n c e d u e to p h y s ic a l a n d h u m a n c a p ita l

Knowledge Gap and Wealth of Nations

5

Knowledge Economy

Concept of KBE or KE

- An economy where creation, acquisition, circulation (dissemination) and uti-lization of knowledge is the core (engine) of growth. (OECD)

Why knowledge now?

- “Throughout history, relative economic performance has been closely associated with the capacity of countries to participate in successive technology/knowledge revolutions (agriculture, manufacturing, services, knowledge societies)”;

- “Knowledge has played a critical role in differentiating the long run economic per-formance of countries”;

- “In the last 50 years, economic growth has been closely associated with urbaniza-tion, emergence of new organizational forms, and regional and global trade—all these trends, in turn, are closely linked to agglomeration of people and ideas”

Stages of Economic Development

6

Factor-driven Economy

Investment- driven Economy

Innovation- driven Economy

• Basic factor conditions (low cost labor, natural re-sources, geographic loca-tion) are the dominant sources of competitive advantage

• Technology is assimilated through imports, FDI and imitation

• Companies have limited roles in the value chain, and focus on assembly, labor intensive manufac-turing, and resource ex-traction

• The economy is highly sensitive to world eco-nomic cycles, commodity prices, and exchange rates

• Innovative products and services at the global technology frontier are the dominant sources of competitive advantage

• Characterized by strengths in all areas to-gether with the presence of deep clusters

• Companies compete with unique strategies that are often global in scope

• The economy has a high service share, and is re-silient to external shocks

• Efficiency in producing standard products and services is the dominant source of competitive ad-vantage

• Foreign technology is ac-cessed through licensing, joint ventures, FDI, and imitation

• The nation is not only as-similating foreign tech-nology, but has the capac-ity to improve on it

• Heavy investment is made in efficient infrastructure, modern production process, and ease of do-ing business

Source: Porter, Michael E. Competitive Advantage of Nations, 1990.

Development Stages in the Korean Economy

Stages of Development

Aid,Laborintensiveproduction

1950s1950s 1970s1970s 1980s1980s 1990s1990s 2000s2000s1960s1960s

ImitationSimple tech.Import of oldplant/machinery

Heavy industryAssimilationMinorinnovations

R&DNew product development

R&D intensiveincrease in scienceNew productinnovation

Innovationfrontier

Agricultural Economy

Invesment-driven Economy

“Extensive Growth”

Innovative Economy

“Intensive Growth”

Traditional

Factor-driven Economy“Extensive Growth”

Outward-looking

Innovative Catch-up

Transition to Innovation-driven Economy Out-

ward-looking

Imitative Catch-up

7

8

Strong Correlation: GDP/Capita and KE Index

Source: KAMAfrica GDP/capita = $2624

Regression KEI 2002 and GDP per capita 2002

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00

Knowledge Economy Index 2002

GD

P p

er

ca

pit

a 2

00

2 (

19

95

co

ns

tan

t U

S$

20

02

)

R2 = 0.66Finland

Brazil

ChinaIndia

Korea

RussiaJordan

Ireland

Poland

South Africa

Ethiopia Ghana

Turkey

USA

UK

Slovenia

Taiwan

9

Global economy is changing the landscape of economies in Asia

- Knowledge has increasingly become an important means for value cre-

ation.

- The knowledge content of goods and services is increasing as manu-

facturing is “dematerializing” and economies are becoming

“weightless”.

- Globalization and the ICT revolution are emerging in the modalities of

creating value.

The Importance of KBE

- Knowledge-based economies is a global trend.

- PRC’s economy is expected to be the largest in the world and the Asian

economic landscape will continue to be pushed to high-growth.

The Importance of Knowledge-Based Economy (KBE)

10

Asian government is facilitating and creating opportunities toward a

more knowledge-based economy and society.

Four pillars of a KBE

- Education, including building a skilled workforce

- National innovation systems, including science and technology, R&D

- Building networks, including ICT infrastructure and social networks

- Policy and regulatory (business) environment

New paradigms for managers and policy makers

- Distinction between knowledge and information

- Recognizing and managing intangibles

- Attention to tacit knowledge

- Stakeholder capital in a networked economy and society

- Value-driven development

11

The Four Pillars of the Knowledge Economy

Education

Innovation SystemsInformation Infrastruc-ture

Interconnected

Interdependent

Biz Environment and Institutional Regime

12

Asian governments envision and plan for a mix of KBE

- Thailand’s IT2010: “good use of ICT”

- e-Korea Vision 2006: “quantitative expansion of the Internet”

- e-Japan strategy: “knowledge-emergent society”

Models Toward a Knowledge-Based Economy(KBE)

13

Knowledge-Based Economy Indicators for the Asian Region

14

Education and the skilled workforce

- Skills required in a KBE such as communication skill, critical thinking

and problem solving, sustainable use of resources, development of

self and a sense of community, expanding world vision

- New teaching and learning strategies are needed.

- Diaspora (migration of workforce) is critical issue and Asian countries

face the issue of retaining the skilled workers. “Brain drain” can be

“Brain gain” which raises the skill level of the home country.

The Four Pillars of a Knowledge-Based Economy

15

National innovation systems (NIS)

- “A subsystem of the national economy in which various organizations

and institutions interact and influence each other in the carrying out of

innovative activity.”

- Innovation and improvement in technical capacity are the result of

a complex set of relationships among actors creating, acquiring,

disseminating, and applying various kinds of knowledge.

- Actors are private enterprises, universities and public research

institutions, relevant financial institutions, and the government.

An innovation is the implementation of a new or significantly improved

product (good or service), or process, a new marketing method,

or a new organisational method in business practices, workplace or-

ganisation or external relations. Also, new material or new resources

finding is included in innovation. An innovation creates new values.

16

Building Networks

- Capacity of ICT to support the development of networks and to establish and

maintain connections among individuals, groups, and organizations is

considered to be of great use of and value to others.

- Benefits of ICT and Networks (The ICT revolution has fast-tracked the

innovation process)

- Toward an ubiquitous network society (social computing of voicemail, e-mail,

online chats, and collaborative applications)

- Elements needed in building ICT are an appropriate regulatory framework,

readiness and availability of human resources, research and education of IT

skills.

Setting the policy and regulatory environments

- Policy: legislation, organization/reorganization, and regulations

- Planning: formulation of vision, strategy, and road map

- Infrastructure and programs: establishing and implementing the needed

physical, institutional, and social infrastructure and programs

Gross Expenditures on R&D in PPP by Country and as Percentage of Global Expenditures 2010

17

The R&D Input Landscape

18

19

Framework for Cross-leveraging Knowledge Assets Across the Asian Region

20

Technological Catch-up

21

Definition of Technology

- Technology is the knowledge useful for production of goods and services.

Importance of Technology

- The history of human being is the history of knowledge (science and technology).

- Technology and productivity are the main engines of economic growth.

- Technology is the main determinant of competitiveness.

- Technology affects welfare of individuals and the society.

Technology and Development

22

Stages of Industrial Development in the World

Agricultural Economy

IndustrialEconomy

Knowledge-based/InnovativeEconomy

• Land

• Labor

• Natural Resources

• Capital

• Labor

• Management

• Science & Technology

• Innovation

• Entrepreneurship

23

Technology and Development

Social Infrastructure, Culture And Institutions

Social Infrastructure, Culture And Institutions

Economic GrowthEconomic Growth

Technology DevelopmentTechnology Development

Resources for education, health, communication,Employment

Resources for technologydevelopment

Productivitygains

Advances in medicine,communications, agriculture,energy,Manufacturing, etc.

Knowledge,creativity

Source: UNDP. 2001

24

Two Patterns (Stages) of Economic Growth o Extensive Growth - Increasing production by increasing input of production factors o Intensive Growth - Increasing production by productivity increase (More production is possible with the same resources.)

Technology, Productivity and Economic Growth

Technology → Productivity → Trade and Industry → Economic Growth

Technology and Economic Development

25

Technology and Economic Growth

Creation of

Technology

Creation of

Technology

Investment in

Technology

Investment in

TechnologyInnovationInnovation

Increase in Productivity

Strengthening International

Competitiveness

Increasing Trade

Increase in Productivity

Strengthening International

Competitiveness

Increasing Trade

Economic Growth Economic Growth

First Stage

Second Stage

Virtuous Circle (Increase sin Income, Demand, Investment, etc.)

26

120

100

80

60

40

20

0

- Technological innovation plays a key role in productivity increase, long-term economic growth and enhancing living standards. (Innovation is the engine of growth.)

Innovation Capability

0 20 40 60 80 100 120

◆ China

Italy ◆ ◆ Mexico

Korea ◆

◆ Japan

◆Taiwan

◆ German

France◆

◆ Canada

◆ England

◆ USA

Innovation and Economic PerformanceR

elat

ive

Eco

no

mic

Per

form

ance

Note: As of 2000.

27

Two different Development Stages

Extensive Growth:Input-driven growth

Intensive Growth:Innovation (productivity)-driven Growth

- Increase in inputs (e.g. employment, education level, stock of physical capital: mobilization of resources)

- Increase in the output per unit of input (e.g. better management, better economic policy, increase in knowledge, technological progress)

- Diminishing returns - Constant returns

- Limited Growth - Sustained growth

- Based on perspiration - Based on inspiration

Development Stages in the Korean Economy

Stages of Development

Aid,Laborintensiveproduction

1950s1950s 1970s1970s 1980s1980s 1990s1990s 2000s2000s1960s1960s

ImitationSimple tech.Import of oldplant/machinery

Heavy industryAssimilationMinorinnovations

R&DNew product development

R&D intensiveincrease in scienceNew productinnovation

Innovationfrontier

Agricultural Economy

Invesment-driven Economy

“Extensive Growth”

Innovative Economy

“Intensive Growth”

Traditional

Factor-driven Economy“Extensive Growth”

Outward-looking

Innovative Catch-up

Transition to Innovation-driven Economy Out-

ward-looking

Imitative Catch-up

28

Science Technology and Innovation

Science is the process of generating knowledge based on logic and evi-dence.

Technology is the application of scientific knowledge to production, and frequently involves invention, i.e, the creation of a novel object, process or technique.

Innovation is the process bringing together new ideas and technology, or finding novel applications of existing technologies. Generally, innovation means developing new ways of doing things in a place or by people where they have not been used before. Modern innovation is usually stimulated by innovation systems and pathways.

The phrase ‘Science and Innovation’ implicitly includes science, engineer-ing, technology and the production systems which deliver them.

29

Five Dimensions of STI Capacity

National (and local)government capacity to formulate and implement coherentS&T programs and policies

Enterprise capacity toutilize knowledge to innovate and producehigher value added,globally competitivegoods and services

Technologically andscientifically skilledworkforce trained to equipment andproduction processes

Production of newknowledge via R&D

Import, adapt, andadopt knowledgeproduced outside thecountry

Source: Ansu, Yaw, 2007 30

STAGE ONE

Simple manu-fact-uring un-der forei-gn guidance

STAGE TWO

Have support-ing industries, but st-ill under foreign guid-

ance

STAGE THREE

Management & te-chnology

mastere-d, can produce hig-h quality goods

STAGE FOUR

Full capability in in-novation and pro-duct design

as glo-bal leader

VietnamThailand, Malaysia

China-1

Korea, Taiwan,

China-2

Japan, US, EU

Agglomeration

(acceleration of FDI)

Creativity

Border to Middle

Income Economies

Stages of Catching-up Industrialization

Initial FDI

absorption

Internalizing

parts and

components

Technology

absorption

Internalizing

skills and

technology

Internalizing

innovation

STAGE ZERO

Monoculture, sub-sistence

agriculture, aid depende-ncy

Pre-

industrialization

Arrival of

manufacturing

FDI

Poor countries

in Africa

31

Source: Kenichi Ohno. 2009

32

Acquisition

Assimilation

Improvement

Creation

Stages of Technology Capacity Building

Developing

Country

Newly-Industrializing

Country

Advanced

Country

Imitation Internalization GeneratingS&T & R&D Stages

DevelopmentStages

33

Imitation Stage

Internalization Stage

Generating Stage

Assimilation of imported technologies

Product based innovation

Automobile, shipbuilding, DRAM, CDMA, TFT-LCD

Path-navigating innovation

Fuel cell, 4G mobile handset, next generation vehicle

Textiles and consumer electronics

The Example of Korea

Catch-Up Oriented Industrial Technological Capabilities in Developing Countries

Accelerate Enhancement

Aim for Independent Innovation

Firm-Level National-Project-Level Take Leaders as Reference

In-dus-try-Level

Coordinated Development of System

CapabilityEnhance-

ment

ExternalSupports

InternalEfforts

CapabilityEnhance-ment

IndependentDevelopment

Closing toAdvanced Level

Capability Enhancement

Core Technologies, Advanced Technologies…

Industry Planning, Policy, Effects

Source: Hong, Su, Lu 34

35

R&D Expenditure / GDP by Region

36

R&D Expenditures in Asian Countries (in US$ million)

Reprinted from: Ismail, M. 2013. p.5.

37

High Technology by Sector

Reprinted from: Ismail, M. 2013. p.4.

38

Knowledge-based Development (KBD)

The central ideas of the KBD

- Shifting value creation toward creation and useful application of human

knowledge;

- Creation, development, and deployment of three types of knowledge assets:

knowledge embodied in people (human capital), knowledge embedded in

formal or informal structures and processes (structural or process capital),

and knowledge, information and support from relationships, linkages and

networks (stakeholder capital).

- Attention to the three value domains of sustainable development (economic,

socio-cultural, and natural) and hence a strategic national perspective for

leveraging on a country’s unique mix of financial, intellectual, socio-cultural,

and natural capital.

Leveraging on a country’s unique human capital

39

Setting up structural capital that empowers farmers

Innovating new sustainable enterprise models

Knowledge networking for critical capabilities

Building on indigenous social capital for enterprise development

Optimum mix of overseas development assistance, private, and public in-vestment in various forms of capital

40

East Asian Regional Initiatives

Formulation of a KBD Model

Focused Anti-Poverty KBD development agenda

Training of economic/development planners and establishment of an

e-community of KBD planners in Asia

Cross-leverage knowledge assets across the Asian region

Networking of Asian institutions in knowledge management and organi-zational learning

Assist in formulating KBE plans

Policy study on cross-border e-commerce

National Science Strategies-NEA

Japan

2001 Knowledge Cluster Industrial Cluster initiatives2006-2010 3rd Science Basic PlanRegional Innovation Systems

Council for S&T Policy (CSTP)21st Century Centres of Excellence

South Korea

2003 Balanced National and Regional DevelopmentRegional Innovation SystemsNURI (New University for Regional Innovation)

Brain Korea 21

China

2006 11th National 5year Guidance, Issues of balanced development; Regional Innovation Systems

Establishing over 40 economic and technical zones to attract foreign high-tech FDIs; Helping MNCs to establish R&D center

863 plan (80s)Torch program (1988- ) 53 high tech zonesReforms in Chinese Academy of Sciences (CAS) Knowledge innovation program (2001-)211, 985 1st , 2nd phase

41

42

Inter-organisational and Regional Learning

‐ Taiwan – Developing local technological capabilities of SMEs, ITRI; brain circulation between Hsinchu and Silicon Valley and mainland China

- Singapore –Big science initiatives, National Research Foundation (NRF) , A*Star; attraction of foreign talents and institutes

- Daejon/Korea – KAIST, high tech amalgamation and entrepreneurship. R&D concentration in Seoul.

43

MNEs and Academic Capabilities: China

• 750 R&D centres with foreign investment in China in big cities (e.g. Beijing, Shanghai, Guanzhou and Shenzen) in 2005

• Re-integration (R&D with production sales) and re-agglomeration (spatially close to each other) in the Beijing-Tianjin city-region

• Competition for talents in Beijing and Shanghai and decentralising efforts in collaboration with the top universities in the regions

• Localisation of the MNC R&D centres

• Intra-country spatial dynamics

• Building RIS with universities and MNEs

44

Global R&D Landscape (2012)

4545

Interactions in a National Innovation System Interactions in a National Innovation System

University ResearchInstitutes

ResearchInstitutes

GovernmentGovernment

Industry

IndigenousKnowledgeBase

IndigenousKnowledgeBase

GlobalKnowledgeBase

GlobalKnowledgeBase

KnowledgeFunding

Researchers

GraduatesGrants

Tax

Incentives

Grants

Funding

Technology

Knowledge

Knowledge

• Industrial & Technological Deepening• Transition to Knowledge Based Economy• Sustainable Economic Growth

• Industrial & Technological Deepening• Transition to Knowledge Based Economy• Sustainable Economic Growth

Funding

Source: Suh. 2000Source: Suh. 2000

46

Roles of the Three Main Players

Universities – undertake basic science and technology research– educate scientists and technologists needed by business and government

Governments – design IPR system for business and universities – commission science research e.g. for defense – finance universities, subsidise business R&D

Business (Private) sector – conduct R&D to develop commercial products – launch innovative products – start up new firms to exploit new science

47

Conceptualization of the R&D system

Source: Jeong Hyop Lee. “Evolution of Republic of Korea’s R&D System in a Global Economy”.

48

Innovation

49

50

Types of Innovations

Product innovation: introduction of a good or service that is new or signific-antly improved with respect to its characteristics or intended uses. This in-cludes significant improvements in technical specifications, components and materials, incorporated software, user friendliness or other functional character-istics.

Process innovation: implementation of a new or significantly improved pro-duction or delivery method. This includes significant changes in techniques, equipment and/or software.

Marketing innovation: implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing.

Organisational innovation: implementation of a new organisational method in the firm’s business practices, workplace organisation or external relations.

New resources or material: used as inputs of production

LG Electronics, Samsung Electronics

22.3 (1)Air-conditioners

Samsung Electronics, LG Electronics.

14.3 (1)Refrigerators

Hyundai Heavy Industries,Doosan Engine Co.,STX Heavy Industries

59.6 (1)Large diesel en-gines for ships

Hyundai Heavy Industries, Samsung Heavy Industries, Daewoo Shipbuilding & Ma-rine Engineering Co.

80.0 (1)LNG carriers

Hyundai-Kia Motors, GM Daewoo

9.8 (4)Automobiles

Samsung Electronics, LG.Philips LCD 46.5 (1)TFT-LCDs

Samsung Electronics,Hynix Semiconductor

49 (1)Semiconductors

CompanyWorld market share% (Rank)

Product

Petrochemical products

LG Chem, SK 45 (1)

Industrial Power of Korea(Most recent period)

5151

Roles of Government and Private in R&D in IT

52Source : DaeJae Jin

5353

Shift in STI Policy in Korea

Focus

View

Resource Allocation

Governance

Strengthening ST capacity Supporting industrial development

Domestic-orientation

Emphasize investment increase Unbalanced regional allocation

Government-led ST personnel initiate

Leading KBE Creating new industries, Growth engine Meet social demand

Globalization utilization of foreign resources

Enhancing efficiency of R&D Balanced regional development

Partnership among government, people, region Increasing participation of citizens in ST decisions

5454

National Innovation Strategy

Innovation Resources Innovation Policy

• Science & engineering workforce • Access to higher and postgraduate education• Availability of risk capital• High quality of information • Infrastructure

• Subsidy and grant program• R&D tax policy• Education policy & funding• Intellectual property protection policy• Openness to international trade and investment

National “Knowledge” Stock

• “Basic” research investments• Cumulative innovation record• Overall technological sophistication

5555

Strategies for Securing National Competitiveness

Acquisition of World-top-class Technologies - Korea should pour more R&D efforts to core technologies and emerging technologies on the basis of strong basic science

World Class Education for HRD - For this and stronger international competitiveness, the Korean education system should be reformed as quickly and broadly as possible

Innovation-driven Economy and Innovation of NIS - Through a balanced and efficient NIS, Korea should realize an innovation- driven economy ahead of China

Active Opening of the Economy - All these require active opening of the economy to the world. The whole country should be a ‘special economic zone’

Critical Lessons

- Investing in S&T capacity is not a luxury for the rich; it is an absolute ne-cessity for poor countries that wish to become richer – there is no choice.

- The time to start investing and building capacity is when you are poor.

- Countries at different stages of development, and employing different learn-ing strategies, need to invest in different aspects of S&T capacity – plugging in, catching up, innovating: different tasks and challenges for different stages of development.

56

Innovation Approaches

Market-Driven Innovation

- Innovation for (Product ⇒ Technology)

Technology-Driven Innovation

- Innovation for (Technology ⇒ Product)

TechnologyProductMarket

Market /Demand Pull Technology/R&D

TechnologyProductMarket

Market /Demand Technology Push

57

(Yen Billion)

5858

Comparison of the Operating Profits of Samsung and Japanese Electronics Companies (Jul-Sep,

2009)

Source: Compiled from Japanese Newspapers

59

Five Strong Points of Korean Firms Viewed by Japan

Adversary or recession is the period to drive- It is the best time to leap forward when the rival is retreating.

Discard egalitarianism (=everything is equally important)- Concentrate on growing or emerging areas without worrying barriers or

difficulties

Commodities rather than products- Instead of enforcing selling technologically superior products, develop

commodities wanted by buyers

Do not depend on the domestic market- Always conscious of the world market

Endlessly learning and practice- Diligently learn superior techniques to re-create own capability

60

Outward-looking development strategy

- Government policy toward FDI and TT Focus on indigenous R&D

- Government-led industrial development

- Industry-targeting

- Favoring large enterprises R&D system biased for large enter-prises

- S&T for industrialization R&D system biased toward technology devel-opment

- Rich pool of well educated HR in ST High absorptive capacity

- Government-led development of S&T infrastructure Relative impor-tance of GRIs

Key Factors of the Korean NIS Development

61

Strengthening innovation systems

• Increases in government funding for R&D

• Change in funding and governance of public research– More project funding– More targeting of priority areas (IT, biotech, nano, energy)– Greater use of priority setting

• Support for business R&D increasing– Entrepreneurship and SME financing– Shift in financing of business R&D away from direct funding and

toward tax incentives

• Strenthening industry-science linkages– Boost patenting & licensing of public research– Proliferation of public/private partnerships– Collaborative research

62

Asian-Pacific STI: Different Industry Structures

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Japan United States(2002)

Korea (2001) Australia(2002)

New Zealand

Fewer than 50 50-249 250 or more

R&D by size of firm

0

20

40

60

80

100

UnitedStates

Korea(2003)

OECD EU Japan Australia

%High-technology Medium-high technology Medium-low- and low-technology

Source: OECD, R&D Database, June 2005.

R&D by industry sector

63

Different Institutional Role in R&D and Innovation

0

10

20

30

40

50

60

70

80

90

100

Sw

ed

en

Ko

rea

Jap

an

Un

ited

Sta

tes

OE

CD

EU

-25

Ch

ina

Au

stra

lia

Ne

w Z

ea

lan

d

Me

xico

Industry Higher EducationGovernment Private Non-Profit

By source of funding By performer

Source: OECD Main Science & Technology Indicators, June 2005

0

10

20

30

40

50

60

70

80

90

100

Jap

an

Ko

rea

Sw

ed

en

Un

ited

Sta

tes

OE

CD

Ch

ina

EU

-25

Au

stra

lia

Ne

w Z

ea

lan

d

Me

xico

Industry Government Other Abroad

Human Resources: Researchers

0

2

4

6

8

10

12

14

16

18

20

Finland Japan UnitedStates(1999)

NewZealand(2001)

Australia(2002)

Korea OECD(2000)

EU25(2002)

China Mexico(1999)

of which: business enterprise researchers Others

• Total number of researchers in China = 811,000 in 2002, up from 471,000 in 1991.

• Most recent figures for US, EU, Japan and Korea in 2001/2 were: 1.2 billion; 1.0 billion, 676 thousand, and 136 thousand, respectively

• Researchers per thousand have increased in all Asia-Pacific countries, US, and EU.

Researchers per 1000 employment

Source: OECD Main Science & Technology Indicators, June 200564

65

Supplies of Scientists and Engineers

30.8 33.4 13.0 33.2 31.3 29.0 33.4 32.8 39.3 35.2

0

5

10

15

20

25

30

35

40

45

Ko

rea

EU

-15

Jap

an

Me

xico

OE

CD

Be

lgiu

m

EU

-19

Au

stra

lia

Ne

w Z

ea

lan

d

Un

ited

Sta

tes

%Science degrees Engineering degrees Share of women % S&E in 1998

Percentage of S&E degrees awarded to women

Share of S&E degrees in all tertiary level degrees

Source: OECD Education Database, June 2005

National R&D Priorities in Asia-Pacific Countries

Australia Environmentally sustainability; promotion and maintenance of good health; frontier technologies for transforming industry; safeguarding Australia.

Japan Life science, ICT, environment; nanotechnology and materials.

Korea Digital TV & broadcast; displays; intelligent robots; new generation automobiles; semiconductors; mobile communication; intelligent home networks; digital content & solutions; batteries; biomedicine.

New Zealand Biotechnology; ICT, creative industries.

United States Homeland security; networking and information technology; nanotech; priority areas of physics, biology of complex systems; climate, water and hydrogen.

Source: OECD Science, Technology and Industry Outlook 2004 66

Often Linked to NPSstrategies

Australia Backing Australia’s Ability

Strengthen ability to generate ideas, undertake research; accelerate commercialisation; develop & maintain skills

China Revitalizing the Nation through Science and Education

Improve opportunities for market-based innovation to improve economic growth and performance

Japan S&T Basic Plan Boost economic effects and social benefits of intellectual assets

New Zealand

I3 Challenge Define national needs, strengthen long-term research, extract greater commercial value

Source: OECD Science, Technology and Industry Outlook 2004.

67

68

Key Policy Goal: Economic Catch-up

• Strengthen growth through innovation and adoption of technologies from ex-ternal sources.• Effective inward transfer and technology adoption relies on indigenous

adaptation, innovation.

• Post-1945 development of W. Europe, Japan, East Asian tigers, benefited from inward technology transfer & adoption.

• Contemporary developing economies can benefit from similar “catchup” strategies.• Requires strong links with international sources of knowledge, capital,

technology.• Investment in physical & human capital to strengthen domestic capacity

to modify & improve imported technologies.

69

Elements of “Pro-Catchup” Innovation Policy

• Increase public and private R&D investment, especially in nongov’t R&D performers (universities, industrial firms).– Support a diverse mix of performers of publicly funded R&D.– Include competition, evaluation in public R&D programs.

• Strengthen linkages with international sources of knowledge, technology.– Tap into nonresident diaspora.– Support student, scholarly exchange with foreign universities & research

institutes.– Support inward foreign investment as a source of technology and com-

petition for domestic firms.• Support technology adoption by domestic firms, farms.

– Public “extension services” in agriculture, services, manufacturing.• Increase investment in human capital:

– Primary , secondary, & post-secondary education.– Training of the employed workforce.

70

US Patent Application Trends

Source: USPTO

71

Trends in R&D/GDP

Source: OECD

72

Comparison of R&D/GDP

Source: OECD, UNESCO

73

Catch-up with US 1970-2010

Source: OECD

(Constant market prices at 2005 ppps)

74

OECD’s Recommendation for Innovation by Development Level

75

Drawing Lessons from Country Experiences

Strong leadership and political will

Clear policy direction and adequate support for implementation

R&D investment

Strengthening linkages with the private sector

Exploring innovative ways of achieving desired outcomes

Use of ICT for marginalized groups

- Farmers, poor communities, underprivileged sectors have been provided

online support.

- Rural kiosks in India, Cybercare in Malaysia, Promotion local products in

Thailand, IT education in ROK

Observations and Lessons

- Ability to produce new knowledge (R&D) is important, but the ability to absorb and utilize existing knowledge may be even more important at early stages of development – National systems of economic learning and technology diffu-sion.

- Absorptive capacity of enterprises and labor force must be developed – spillovers (from FDI) are not automatic.

- S&T capacity building policies should be devised within the context of an overall industrial development strategy – not separately

- Getting basics right-rule of law, business climate, etc. - is absolutely neces-sary but not sufficient.

- Goal of universal primary education should be complemented by expanded ac-cess to vocational, secondary and tertiary education.

- Political commitment is needed since it takes a long time for capacity building to affect economic development and poverty.

76

- A critical challenge is increasing the effective demand for R&D by develop-ing enterprise capacity to innovate and utilize knowledge.

- Tension between expanding the supply of skilled workers and the private sector’s demand for skilled workers-chicken and egg / brain drain vs. skill shortage

- How firms learn, from whom, and how they innovate is a key issue.

- Freer trade and attracting FDI is necessary but not sufficient – spillovers will not occur without accompanying capacity building efforts.

- Increased spending on education and/or R&D will not improve economic performance, if there are poor linkages between research institutes and education sector on the one hand and enterprise sector on the other. Linkages, quality and relevance are critical.

- Need for focus and realism – don’t spread resources too thin; develop a few niche areas; today’s comparative advantage vs. tomorrow’s needs; existing strengths vs. new competencies – comparative advantage must be created.

77

References

Brad, Carlos A. P. 2003. “Leveraging the Knowledge Economy”, World Bank (PPT, Google).

Crafts, Nick. “Divergence Big Time: Economic Growth Since 1870”, (PPT, Google).

Mowery, David C.. 2012. Notes on innovation policy and development.

Paic, Alan. 2011. “Enhancing South East Europe Competitiveness through in-novation and human capital development”, Bank of Greece-University of Oxford (SEESOX) Conference Athens (PPT, Google).

Ray, A. S. & Bhaduri, S. “A game theoretic model of optimum IPR regime and technological capability: Implications of TRIPS for developing countries”, Jawaharlal Nehru Univ., India (PPT, Google).

78

79

Sheehan, Jerry. 2005. “Science, Technology and Innovation in the Asia-Pa-cific Region: Trends and Policy”. (PPT. OECD)

Rodriguez, Francisco & Wilson, Ernest J. III. “Are Poor Countries Losing the Information Revolution?”, University of Maryland at College Park (PPT, Google).

Watkins, Alfred. 2005. “Building Science, Technology, and Innovation Ca-pacity for Development”, S&T Program Coordinator HDNED, Presenta-tion to STI Thematic Group (PPT, Google).