Science, Technology and Innovation (STI) and Development: relevance for the Caribbean

1. Science, Technology and Innovation (STI) and Development: relevance for the Caribbean Michael Lim Policy Review Section Science, Technology and ICT Branch UNCTAD-DTL Michael.lim@unctad.org Geneva 19 April 2011 UNCTAD Vi study tour University of the West Indies

2. Outline • Technology and economic growth • Science, technology and innovation (STI) • Innovation systems • National policies for developing STI • National and global challenges • Caribbean challenges and STI

3. The Global Distribution of Knowledge(from UNCTAD LDCR 2007)

4. The Global Distribution of Poverty(from UNCTAD LDCR 2007)

5. Technology and economic growth (1) • Output (Y) is a function of capital (K), labour (L) and technology (T) Y=f(K, L, T) or Output (Y) is a function of physical capital (Kp), human capital (Kh), labour (L), and technology (T) Y=f(Kp, Kh, L, T) In standard neoclassical growth theory Y =T*f(Kp, Kh, L) with technology (T) exogenous (external) ie T=f(?) T is unexplained Kp=f(Kpt, It) where It is new investment in physical capital (t is time) Kh=f(Kht, Iht) where Iht new investment in education and training and health L=f(Lt, grL) where grL is population growth

6. Technology and economic growth (2) • Economic growth is directly a function of Kp, Kh and improved technologies. • Controversy over the relative importance of each; the shares vary by time, industry and country. • Additional growth determinants: Initial conditions; institutions and incentive structures; geography; national policies; perhaps culture.

7. Technology as a source of growth • Since about 1770 technological development has been a major source of global economic growth. The Industrial Revolution in England (1770-1800+) was a notable spur to growth and the start of intensive application of STI to economic production.

8. What is technology? • Technology - knowledge applied to the production of goods or services. • Different forms: - physical machinery -production processes -software -tacit knowledge

9. What is innovation? • Broad definition: The introduction of new or improved products, or of new or improved processes and organizational methods in the design, production and distribution of goods and services. • Invention: A new, useful process, machine, improvement, etc., that did not exist previously and that is recognized as the product of some unique intuition or genius.

10. Types of innovation • All along value chain: production, design, distribution and marketing. • Technological (related to the introduction of new technologies) or non-technological (organizational, managerial or institutional). • Incremental, radical, revolutionary

11. Is STI important?Innovative Capabilities and Income(from UNCTAD LDCR 2007)

12. Wide innovation capability gaps exist among countries and regions (from UNCTAD, WIR 2005) • Factors reflected in the UNCTAD Index: • R&D personnel/million population; • U.S. patents granted per million population; • Scientific publications/million population; • Literacy rate as % of population; • Secondary enrolment as % of age group • Tertiary enrolment as % of age group 12

13. STI applications: there are many • Building strong STI capabilities, accessing foreign technologies and building strong national systems of innovation are important for economic growth, social welfare and addressing environmental challenges. • STI applications: -improving productivity in manufacturing, agriculture and services -preventing food crises (starvation) -increasing value added, diversifying production -mitigating/adapting to climate change -developing new energy sources – renewable energy -water management -public services (health, education) -addressing disease epidemics -organizing mega-cities (smart urban planning) -early warning systems for natural disasters (tsunamis, hurricanes) -slowing desertification etc.

14. Channels of international technology transfer • entry and operation of foreign enterprises (includes FDI and non-FDI) • joint ventures or strategic partnerships • the movement of staff between foreign and domestic enterprises • Linkages between domestic enterprises and transnational corporations (TNCs) • domestic enterprises investing in (or buying) foreign enterprises • imports of machinery • Migration of people • Study through reverse engineering and imitation • licensing agreements • technical cooperation activities • accessing knowledge from technical publications, journals or patent databases • Joint international research projects • International research networks

15. STI capabilities: what are they? (1) • Scientific, technological and innovative capabilities (of different actors – enterprises, farmers etc.). • Broad definition add capabilities in engineering, other technical capabilities, entrepreneurship, management and organizational capabilities. • Institutional capacity for STI policy analysis, formulation, monitoring and evaluation, policy learning, policy change important. • STI capabilities vary by enterprise, farmer, institution, industry, government ministry and country.

16. STI capabilities: What are they? (2) • Scientific capabilities – the ability to learn, understand and apply scientific knowledge and skills to solve problems. • Engineering capabilities – the ability to learn, understand and apply engineering knowledge and skills to solve problems. • Technological capabilities – the ability to learn, understand and master the use of existing (both traditional and recent) technologies to solve problems;the ability to produce new technologies. • Innovative capabilities – the ability to innovate. • Technological learning by enterprises (firms and farmers most importantly) is important for technological development of a country.

17. Linear models of innovation

18. Framework conditions ▪ Financial environment ▪ Taxation and incentives ▪ Propensity for innovation andentrepreneurship ▪ Trust ▪ Mobility ▪ Education, Literacy Demand ▪ Consumers (final demand) ▪ Producers (intermediate demand) Business system ▪ Companies ▪ Farms ▪ Healthcare, etc Education and research system ▪ Professional education and training ▪ Higher education and research ▪ Public sector research Intermediate Organizations ▪ Research institutes ▪ Brokers, etc Infrastructure ▪ Banking, venture capital ▪ IPR and information system ▪ Innovation and business support system ▪ Standards and norms A National system of innovation(from Arnold and Bell (2001))

19. National policies for STI development (1) STI policy (S&T policy, innovation policy, S&T/innovation strategies) Education and training policies Trade policies Foreign direct investment (FDI) and TNC policies Intellectual property (IP) policies Technology transfer policies S&T infrastructure policies Financial sector policies Macroeconomic policies Industrial policies 19

20. National policies for STI development (2) Physical infrastructure policies (esp. energy, physical clusters (science parks, S&T parks, ICT parks) Migration policies (skilled migrants and brain circulation) MSME policies Policies to support technology start-ups Policies to link SMEs to value chains Entrepreneurship policies Competition policies Metrology, standardization, testing and quality (MSTQ) policies Government procurement policies Cluster policies Developing STI indicators to aid policymaking (analysis, monitoring and evaluation, policy change) 20

21. Stages of technology development by innovation effort(from UNCTAD, WIR 2005) FRONTIER INNOVATION TECHNOLOGY IMPROVEMENT & MONITORING SIGNIFICANT ADAPTATION BASIC PRODUCTION 21

22. Typology of STI policy goals at different stages of development Distant technological laggard countries (early stage). Technological laggard countries (later stage). Near technological frontier countries. At the technological frontier countries. 22

23. National and global challenges • Food security – food crises, malnutrition, starvation • Climate change • Energy security – fossil fuels and RETs • Water security • Natural resource depletion • Growth, employment and natural resource sustainability • Malthusian trap?

24. STI and climate change • STI role in adaptation and mitigation (green economy) • Many activities/industries (energy, transport, agriculture etc) • Diffuse existing environmentally sound technologies (ToT) (UNFCCC) - RETs • Develop (and diffuse) new technologies • Capacity building at various levels (for technology absorption), especially in poorest countries • Building innovative capabilities for CC

25. STI and climate change (2) • Dichotomy of commercial interest versus public good of a good natural environment • Issue of IPRs • Issue of financing ToT and capacity building • Global crisis-related (2008-9) stimulus plans and STI for CC

26. STI in the Caribbean: national and regional challenges • Diversification (resource-based economies – tourism, oil and gas, agriculture, minerals, fish) • Very small, very open economies: high vulnerability + low resilience to external shocks • Climate change adaptation/mitigation • Food, energy and water security • Competitive enterprises and industries – in services as in industry and agriculture • Not competitive on labour/production costs; innovation needed to compete

27. STI in the Caribbean: STI challenges • Very poor STI statistics • Innovation performance weak (traditional measures - patents) • Little R&D • Low enrolments in technical disciplines, limited S&T human resources, heavy brain drain (some circulation) • Limited financing for innovation, SMEs • Weak entrepreneurial base • Limited investment in innovation? • Weak innovation systems (UNCTAD STIP Review Jamaica 1999 – NIS at fledgling stage)

28. STI in the Caribbean: STI policy issues • Improve STI capabilities and performance • Strengthen national systems of innovation • Develop sub-regional/regional innovation systems • Traditionally inadequate policy support for STI • Need coherent STI/industrial/trade/investment/education policies • Regional/sub-regional action on STI needed • Regional approach in EPA (EU-Cariforum Oct 2008) – IP, innovation, ToT articles included in EPA • EPA impacts still unknown, but EPA controversial

29. Conclusions • Strong STI capabilities, human capital and innovation systems, and easy access to foreign technologies, are important for growth and development, social welfare and facing environmental challenges. • National policy action critical to support each of them for optimal growth and development impact. • STI policies should ideally be a coherent part of a country’s national development policy and strategy (including PRSPs in LDCs). • Many international challenges; STI badly needed. • The Caribbean lags in STI but faces many challenges. STI progress greatly needed.

30. Discussion issues • What is the purpose of science: Conquer nature? Help mankind? • Is technology always good? • Is innovation always good? • Do all countries innovate? • Can STI prevent a Malthusian trap? • Do we have the wisdom to manage technologies?

31. End