Last week NASA tested its latest spacecraft, the Orion, at a cost of US$370m. The perfect test flight brought the USA one step closer to a manned mission to Mars, now scheduled for 2030. Conquering this new ‘frontier’ says a lot about a country, yet this and other kinds of innovation are no longer the preserve of superpowers, says PhD fellow Francesca Guadagno.
In September the first Indian satellite entered Mars’ orbit, costing the Indian government 4.5bn rupees (US$74m), less than was spent to make the movie Gravity. Only the USA, Russia and EU had successfully completed a Mars mission before (and Japan and China had both failed).
Then in October (when many people were distracted by the Argentine debt crisis), Argentina launched its first home-built communications satellite, the first Latin American satellite made with local technologies. These are outstanding achievements for emerging countries like India and Argentina and underline the importance of promoting capabilities’ accumulation and innovation as part of an industrial policy. Three recent events underline their importance.
Why nurture local talent?
My colleague Isabelle Ramdoo and I participated in the second meeting of the E15 Initiative on ‘Reinvigorating Manufacturing: New Industrial Policy and the Trade System’. In my contribution on industrial policies in lower-middle income countries, I focused on the role of capabilities as a key condition of industrial policy success. By allowing for innovation and upgrading, capabilities affect the long-term success of any industrial policy.
For example, the success of the Indian pharmaceutical industry was enabled by the 1970 patent reform that permitted reproduction of overseas-patented drugs. Reverse engineering of existing drugs, however, would not have been possible if the Indian pharmaceutical industry had not accumulated sufficient capabilities beforehand.
These capabilities were built through a science-oriented education system, a history of medicine production, and two state-owned enterprises that created demand for skilled labour and contributed to the emergence of a solid private sector by passing their knowledge on to the private sector and by spinning off new firms.
When will the South catch up?
The role of capabilities in development was also among the key topics of the UNU-MERIT Conference on Innovation and Governance that I contributed to at the end of November. There were three main points to take away from that conference.
Firstly, while figures of R&D expenditure show that R&D activities are still concentrated in the North, industry and firms dynamics reveal a number of counter currents. Some firms in developing countries have accumulated enough capabilities to seize opportunities on the global market (e.g. Embraer in Brazil, or South Africa as an emerging global wine producer).
Secondly, industrial policies play an important role in spurring learning and capability accumulation. These policies increase productivity and allow for export diversification. Higher productivity and export diversification affect economic growth and allow resource-rich developing countries to escape from Dutch disease types of issues. Various policy instruments can be used in this regard. Some of these instruments have a more direct impact on innovation (e.g. R&D grants and subsidies). Others have a less direct impact (e.g. establishment of training centres and industrial parks).
Thirdly, talking about innovation for development requires asking what forms innovation takes in developing countries and how they matter – this is especially true because most developing countries are further away from the technological frontier than India or Argentina.
This ultimately means rethinking definitions and performance indicators. While these already changed almost 15 years ago when Latin American nations started carrying out innovation surveys; today, similar efforts are undertaken in Africa, where 14 countries (Burkina Faso, Egypt, Ethiopia, Gabon, Ghana, Kenya, Lesotho, Mali, Mozambique, Senegal, South Africa, Tanzania, Uganda and Zambia) have already conducted at least one innovation survey.
Innovation surveys collect qualitative and quantitative data on innovation activities and the successful introduction of different forms of innovation by firms in a certain country. How much these surveys can actually capture innovation in different countries depends on how the questionnaire is written and tailored to different country contexts.
So, while redefining innovation in the context of developing countries is necessary and important in order to really capture the novelties introduced on the market, we still have to keep in mind that when South Korea and Taiwan were rising as global powers, this was very well reflected in their R&D statistics.
Does Africa need innovation?
To many, talking about innovation in a continent where 38% of the adult population is illiterate and only 42% of the population has access to electricity makes little sense, or is at best wishful thinking. There is a growing community, however, that thinks that African countries need innovation.
The GLOBELICS community, which held its annual conference in Addis Ababa in late October, is one of them. With an average annual growth rate of 11%, Ethiopia is among the fastest growing countries in the world.
In the last decade, poverty reduced and access to education improved in an unprecedented way. Structural change occurred but mainly benefited services and construction, while labour intensive manufacturing represents a minor share of value added and employment. The government has recently set an ambitious Science Technology and Innovation plan. Among the other results of this plan, public research institutes, science and engineering universities, and the National Science and Technology Research Council have been established. This is an example of the prominence of innovation in development countries’ policies agenda.
So, will Ethiopia go to Mars any time soon? The answer is probably not, even if history has shown that we should be prepared for miracles. However, innovation does not occur only in aerospace or other high-tech industries, but also in lower-tech industries. And not all innovations are technological innovations; organisational, process, and social innovations are also profitable, make innovators successful in their markets, and so affect economic growth, employment, and living conditions.
Hence, the question is not whether we should talk about innovation in developing countries, but rather what types of innovation occur in developing countries, how different types of innovation contribute to economic growth and socio-economic development, and what policies can stimulate innovation in developing countries.
This blog post first appeared on the website of the European Centre for Development Policy Management (ECDPM), where Francesca works as a policy officer on ‘Economic Transformation and Trade’.
Flickr / NASA, BMW Guggenheim Lab