Advancing Knowledge in the Public Sector: A World Bank Perspective ©Knowledge for Development, WBI Carl Dahlman World Bank Advancing Knowledge and the Knowledge Economy January 10-11, 2005

Growing Differences in GDP/Capita

GDP/Capita Growth: Korea vs Ghana ©Knowledge for Development, WBI

Key Issues for Governments in Developing Economies How to help them develop appropriate policy knowledge for broad development strategy? Economic analysis as part of project preparation and or policy dialogue Technical assistance loans Training and helping set up institutional capability What can they do to develop better strategies to make more effective use of technical knowledge for successful economic development Policy analysis/advice/training/study tours visits Projects such as metrology, standards, quality control, public research institutions, higher education

Few Countries Have Sustained High Growth Rates over Long Periods Have analyzed countries with highest growth performance and found that key elements of their strategies, in addition to appropriate macroeconomic management and good economic incentive regimes have been: Massively tapping into global knowledge Investing strongly in education More recently, investing heavily in ICT For most advanced, focusing much more on producing own world frontier knowledge, if not across the board, at least in some sectors

Framework for Using K4D: Four Key Functional Areas Economic incentive and institutional regime that provides incentives for the efficient use of existing and new knowledge and the flourishing of entrepreneurship Educated, creative and skilled people Dynamic information infrastructure Effective national innovation system ©Knowledge for Development, WBI

KAM Methodology KAM: 76 structural/qualitative variables to benchmark performance on 4 pillars Variables normalized from 0 (worst) to 10 (best) for 121 countries Basic scorecard for 14 variables at two points in time, 1995 and 2002 Aggregate knowledge economy index (KEI) ©Knowledge for Development, WBI

Relative Positioning of Countries in Global KE

Conceptual Framework for Innovation in Developing Countries Innovation in developing countries should be understood broadly as something new to the local environment Therefore distinguish two broad types of innovation Local improvements through adoption of existing foreign technology Development of technologies new to world ©Knowledge for Development, WBI

Innovation in Developing Countries In developing countries the first type is the most relevant, the second is rarer, except for the more advanced developing countries Developing countries will get a bigger economic impact from raising average local practice to best world practice than from creation of their own new knowledge They will also get a bigger impact from raising average local practice to best local practice, therefore the critical importance of domestic diffusion ©Knowledge for Development, WBI

Challenges Focus of most S&T policymakers is not on the most important elements of the innovation system in developing countries R&D not the main source of innovation High tech sectors are tiny part of developing economies Service sector is largest share of economic activity Successfully applying knowledge requires entrepreneurship, management, organizations,and also depends on economic and institutional regime Need a better conceptual framework and policy tool kit that Differentiates across countries Provides made to measure policy advice and specific project design ©Knowledge for Development, WBI

Differentiated Strategies AcquiringCreatingDisseminating Catch-Up SectorsMost critical: -lots of knowledge in pubic domain -also large stock to be purchased Therefore need good global scanning and acquisition ability Less relevant or feasible, but still need R&D capability to acquire and adapt. Focus limited R&D efforts on complementing what can be acquired Very important: -extension services -technical information -metrology, standards, testing and quality control -specialized suppliers -growth of most efficient firms Sectors Nearer Frontier Continue tapping global knowledge -FDI/licensing -Strategic alliances -foreign R&D as antennas to tap knowledge Refocus public efforts on commercially relevant research Increase private R&D efforts Stimulate more interaction among R&D institutes, firms and universities Dissemination efforts continue to be critical But also need to commercialize knowledge -technology transfer offices -tech parks/spin-offs -cluster development -regional innovation ©Knowledge for Development, WBI

Three Key Policy Areas for Innovation Policy Education and training policies Appropriate S&T policies Regional cluster policies

Education and Training Policies Increasing average educational attainment of labor force Increasing higher education enrollment rates as it is now more important to make effective use of knowledge as well as to create new knowledge Strengthening the research capability of universities and their interaction with firms and research institutes Developing life long learning opportunities in order to facilitate continuous learning and re- skilling

Specific S&T Policies Increasing public R&D funding, and encouraging private sector to increase its own R&D effort Allocating public funding more effectively Getting more spin-offs from public R&D efforts Encouraging greater interaction among three key domestic actors: public R&D institutes, universities and productive sector Encourage greater investment in R&D and knowledge assets by private sector Encouraging greater interactions between domestic actors and foreign knowledge actors Encouraging brain circulation rather than brain drain Encouraging the development of regional knowledge clusters

Development of Regional Innovation Clusters While the general economic and institutional framework and broad policies towards science and technology and education, are very important, innovation happens at the local level Therefore governments also have to stimulate development of regional innovation clusters. This involves developing stronger interactions among firms, universities and research institutions through formal and informal processes Not just among local actors But increasingly with foreign firms and institutions Also involves regional development policies, infrastructure and logistics

Conclusion Greater attention needs to be paid to creating domestic capability to make more effective use of knowledge S&T strategies appropriate to country’s level of development Policies to help firms and organization to tap into global knowledge more effectively Investments in human resources, especially higher education Development of local R&D capability to scan, acquire and adapt relevant global improve and create appropriate new knowledge Need to make more convincing case to ministries of finance and to business sector that investing in knowledge is necessary and can yield high economic and social returns ©Knowledge for Development, WBI

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Brazil

China

India

Korea

Mexico

Russia

USA