Innovation Policy, Environment and Growth: Basic Comments Keith Maskus University of Colorado at Boulder Prepared for CIES Workshop Graduate Institute, Geneva, 13 Dec 2011

General determinants of innovation Complex issue; much depends on national circumstances and histories. Major stimulants are market-based: relative prices, competition and demand growth. Primary roles of government policy: General human capital and infrastructure supports; Neutral fiscal incentives; Price and regulatory instruments tied to externalities; IPRs and competition policy; “National innovation systems” can be effective and even decisive in creating dynamic markets.

What drives innovation in ESTs? (Measured by patent applications) Anticipated market demands; Relative prices of energy types; Regulatory provisions; Costs of investment; Public grants and subsidies; Mixed evidence at best regarding patents as stimulus; Patents may not be an ex ante stimulus but firms do take out patents for commercialization and ITT. A likely exception is new agricultural and industrial biotech (biofuels, etc.) solutions. Unlikely that promise of patents in poor countries will induce innovation for their needs.

Combining public and private mechanisms In general the roles are separate. Where does useful scope exist for public-private (including foundations) collaboration? Research initiatives in “Pasteur’s Quadrant”. Linking public funding for research and product procurement to distribution and adaptation. Access-oriented licensing models. Such initiatives are increasingly successful in: public health (medicines) university and foundation licensing commitments.

Innovation policies in developing countries Policy experiences and outcomes are just as variable in developing countries (Odagiri et al 2010). Some policy factors that seem to matter positively: Building a strong engineering and entrepreneurial human capital endowment. Openness to global technology markets, including acquisition of lower-cost second-tier technologies. Emphasis on rapid technology diffusion and adaptation among otherwise competitive firms. Incentives for R&D capacity in local enterprises. Facilitating information flows about promising areas of science and engineering. Sound university & public research and extension systems. Calibrated intellectual property systems.

Challenges for innovation policies Relative scarcity of resources and expertise. Small and distorted markets, including for technology. Limited incentives for investments in even adaptive innovation. Emerging international information barriers in science and technology. Costs of searching, acquiring and using IPRs.

Knowledge gaps about poor- country innovation and creativity Little systematic evidence of what drives innovation and creativity and creates knowledge among the poor (what are inputs?). Available measures do not capture its scope and breadth (what are outputs?). Such innovation can be straightforward and incremental; complex and heterogeneous (what are the innovation processes?). What are risks and impediments in bringing innovation to markets? How to incentivize local adaptive innovation for specific needs?

Addressing knowledge gaps Develop or extend household and enterprise surveys that are taken consistently over a period of years. Processes, ownership, use of knowledge. Historic or anticipated reactions to changes in business/policy environments, including IPR. Develop more analytical work on the microeconomics of creativity. Functioning of local innovation/creation markets. Role of finance, especially micro-finance (itself a source of data). How enterprises extend marketing beyond village level. Efficiency and equity of norms and protection/sharing mechanisms in traditional knowledge. Consider new metrics of innovation and creativity.