Innovation Strategies for a Global Economy

1. Innovation Strategies for a Global Economy Fred Gault UNU-MERIT / TUT-IERI Canadian Association for the Club of Rome March 24, 2010

2. Outline • Systems • Dynamics • Limits to Growth • Policy Motivation • What is Innovation? • Policy Process • Absorptive Capacity and Learning • An Example

3. Systems • Actors • Business, Governments, Education, Research and Health Institutions, … • Activities • Absorption of knowledge, capital investment, network investment, research and development, training, … • Linkages • Collaboration, contracts, networks (clients, suppliers, …), value chains, …

4. Systems • Outcomes • Skill or employment levels, market share, regulation compliance, trading capacity, … • Impacts • Collapse of financial markets and global economic recession, social consequences of mobile phone banking, … • Innovation Systems are • global, regional, national, or local • There are many, not one • complex, dynamic and non-linear in response to policy intervention • constrained by framework conditions • Education, health and government services • Regulation and trade rules • History, culture and attitudes (risk aversion) • Geography and natural endowments • What indicators are needed to describe systems? OECD (2007) A first step • CCA (2009) and MFP? • STIC (2009) and the State of the Nation 2008

5. Dynamics • Early work • Herbert Simon • Jay Forrester and the Systems Dynamics Group of the Sloan School of Management at MIT • Designed prototype computer model for Limits to Growth (LTG) Project • Volkswagen Foundation and Club of Rome • Funded the LTG Project • Meadows et al. (1972), The Limits to Growth • Reviewed in Meadows et al. (2004), Limits to Growth, the 30-Year Update

6. Limits To Growth • LTG Project • promoted • Dynamic modelling • The need for data to support dynamic modelling • Systems theory for analysing economic and social systems • raised awareness of • Sustainability of human activity • The need to include physical limits of carrying capacity of the planet • Natural resource limits • Capacity to absorb emissions from human activity

7. Policy Motivation • Innovation Strategies • EU 2006 - 2010, OECD 2007 – 2010, Obama 2009 • Motivation in 2006-2007 • Emerging markets and competitiveness China, India, Brazil, Indonesia, .. • Aging population in developed countries • Knowledge transfer to remaining labour force • Healthcare costs for baby boomers – Key role for CIHR • Difficult decisions on the part of governments

8. Policy Motivation • In 2006-2007 the needs are: • Economic growth in competitive markets • To pay the bills for the aging population • Productivity based growth • Diminished labour force • Education? Migration? Change of subjects? • Sustainable growth • Do no harm • In 2010 • Add paying back the bailouts, requiring more growth • Leading to • Sustainable, productivity based, economic growth • As the policy goal.

9. What is Innovation? • The activity of innovation results in a new or significantly improved • Product (good or service) delivered to the market OR • Process which involves the: • production or delivery of products for the market • organization of the firm or use of management practices to develop, produce or transfer products to the market • development of new or existing markets • The market is always present in this definition (Oslo Manual 2005) • The innovation can be new to the firm or to the market (Understanding public sector ‘innovation’ is a research question)

10. Policy Process • Components • Co-ordination and Implementation • What Indicators? • Absorptive Capacity and Learning • An Example

12. Absorptive Capacity and Learning • How is the policy to be managed? • Interdepartmental co-ordination • Connecting the dots… • Can it this work? • How is policy managed in Canada? • Consider an example for discussion

14. The U.S. Innovation Strategy • Can it be co-ordinated? • Are the resources there to monitor it? • Could Canada do this? • What are the governance issues related to making innovation policy work?

15. Final Thought Going forward, we need to make the question “what would it take for Canada to build an innovative economy for the 21st century” part of our public narrative. (Kevin Lynch 2010)

16. References • CCA (2009), Innovation and Business Strategy: Why Canada Falls Short, Ottawa: Council of the Canadian Academies. • Gault, Fred (2010), Innovation Strategies for a Global Economy, Cheltenham, UK: Edward Elgar. • Executive Office of the President (2009), A Strategy for American Innovation: Driving Towards Sustainable Growth and Quality Jobs, Washington DC: Executive Office of the President/NEC/OSTP. • Lynch, Kevin (2010), ‘Canada’s Innovation Deficit’, Policy Options, March 2010, 30-33. • Meadows, Donella H., Dennis L. Meadows, Jorgen Randers and William W. Behrens III (1972), The Limits to Growth, New York: Universe Books. • Meadows, Donella, Jorgen Randers and Dennis Meadows (eds) (2004), Limits to Growth, The 30-Year Update, White River Junction, VT: Chelsea Green Publishing Company. • OECD (2007), Science, Technology and Innovation Indicators in a Changing World: Responding to Policy Needs, Paris: OECD • OECD (2009) Innovation in Firms, A Microeconomic Perspective, Paris: OECD • OECD/Eurostat (2005), Oslo Manual, Guidelines for Collecting and Interpreting Innovation Data, Paris: OECD • STIC (2009), State of the Nation 2008, Canada’s Science, Technology and Innovation System, Ottawa: Science, Technology and Innovation Council • Fred.Gault@oecd.org or gault@merit.unu.edu