1. 1 East Asian Economy: KBE and Innovation in East Asia * Some parts of this note are borrowed from the references for teaching purpose only. 1 East Asian Economy 2013.12.5 Semester: Fall 2013 Time: Thursday 2-5 pm Professor: Yoo Soo Hong Room: 423 Mobile: 010-4001-8060 E-mail: yshong123@gmail.com Home P.: http://yoosoohong.weebly.com 1

2. Knowledge (Innovation) Based Economy 2

3. Emerging Knowledge Economy  Increased generation/codification of knowledge (e.g., patents granted in the US: from 49,971 in 1963 to 175,983 in 2000)  Closer links with science base/increased rate of innovation/shorter product life cycles  Increased importance of education, up-skilling of labor force, and life long learning  Growing investment in intangibles (R&D, education, brands…) – OECD countries spend more than $520 billion per year in R&D  Value added increasingly associated with investment in intangibles such as branding, marketing, logistics/information management  Innovation and productivity increase more important in competitiveness and GDP growth  Increased Globalization and Competition  Constant change and competition implies the need of constant restructuring and upgrading: the ability to create, access and use knowledge is becoming the fundamental determinant of global competitiveness. 3

4. Knowledge Gap and Wealth of Nations 4

5. Knowledge Economy  Concept of KBE or KE - An economy where creation, acquisition, circulation (dissemination) and utilization of knowledge is the core (engine) of growth. (OECD)  Why knowledge now? - “Throughout history, relative economic performance has been closely associated with the capacity of countries to participate in successive technology/knowledge revolutions (agriculture, manufacturing, services, knowledge societies)”; - “Knowledge has played a critical role in differentiating the long run economic performance of countries”; - “In the last 50 years, economic growth has been closely associated with urbanization, emergence of new organizational forms, and regional and global trade—all these trends, in turn, are closely linked to agglomeration of people and ideas” 5

6. Stages of Economic Development 6 Factor-driven Economy Investment - driven Economy Investment - driven Economy Innovation - driven Economy Innovation - driven Economy Source: Porter, Michael E. Competitive Advantage of Nations, 1990.

7. Development Stages in the Korean Economy Stages of Development Aid, Labor intensive production Aid, Labor intensive production 1950s 1970s 1980s 1990s 2000s 1960s Imitation Simple tech. Import of old plant/ machinery Imitation Simple tech. Import of old plant/ machinery Heavy industry Assimilation Minor innovations Heavy industry Assimilation Minor innovations R&D New product development R&D New product development R&D intensive increase in science New product innovation Innovation frontier Agricultural Economy Invesment-driven Economy “Extensive Growth” Innovative Economy “Intensive Growth” Traditional Factor-driven Economy “Extensive Growth” Outward-looking Innovative Catch-up Transition to Innovation- driven Economy Outward-looking Imitative Catch-up 7

8. Strong Correlation: GDP/Capita and KE Index Source: KAM Africa GDP/capita = $2624 8

9. 9  Global economy is changing the landscape of economies in Asia - Knowledge has increasingly become an important means for value creation. - The knowledge content of goods and services is increasing as manufacturing is “dematerializing” and economies are becoming “weightless”. - Globalization and the ICT revolution are emerging in the modalities of creating value.  The Importance of KBE - Knowledge-based economies is a global trend. - PRC’s economy is expected to be the largest in the world and the Asian economic landscape will continue to be pushed to high-growth. The Importance of Knowledge-Based Economy (KBE)

10. 10  Asian government is facilitating and creating opportunities toward a more knowledge-based economy and society.  Four pillars of a KBE - Education, including building a skilled workforce - National innovation systems, including science and technology, R&D - Building networks, including ICT infrastructure and social networks - Policy and regulatory (business) environment  New paradigms for managers and policy makers - Distinction between knowledge and information - Recognizing and managing intangibles - Attention to tacit knowledge - Stakeholder capital in a networked economy and society - Value-driven development

11. The Four Pillars of the Knowledge Economy Education Innovation Systems Information Infrastructure Interconnected Interdependent Biz Environment and Institutional Regime 11

12. 12  Asian governments envision and plan for a mix of KBE - Thailand’s IT2010: “good use of ICT” - e-Korea Vision 2006: “quantitative expansion of the Internet” - e-Japan strategy: “knowledge-emergent society” Models Toward a Knowledge-Based Economy(KBE)

13. Knowledge-Based Economy Indicators for the Asian Region 13

14. 14  Education and the skilled workforce - Skills required in a KBE such as communication skill, critical thinking and problem solving, sustainable use of resources, development of self and a sense of community, expanding world vision - New teaching and learning strategies are needed. - Diaspora (migration of workforce) is critical issue and Asian countries face the issue of retaining the skilled workers. “Brain drain” can be “Brain gain” which raises the skill level of the home country. The Four Pillars of a Knowledge-Based Economy

15.  National innovation systems (NIS) - “A subsystem of the national economy in which various organizations and institutions interact and influence each other in the carrying out of innovative activity.” - Innovation and improvement in technical capacity are the result of a complex set of relationships among actors creating, acquiring, disseminating, and applying various kinds of knowledge. - Actors are private enterprises, universities and public research institutions, relevant financial institutions, and the government.  An innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations. Also, new material or new resources finding is included in innovation. An innovation creates new values. 15

16. 16  Building Networks - Capacity of ICT to support the development of networks and to establish and maintain connections among individuals, groups, and organizations is considered to be of great use of and value to others. - Benefits of ICT and Networks (The ICT revolution has fast-tracked the innovation process) - Toward an ubiquitous network society (social computing of voicemail, e-mail, online chats, and collaborative applications) - Elements needed in building ICT are an appropriate regulatory framework, readiness and availability of human resources, research and education of IT skills.  Setting the policy and regulatory environments - Policy: legislation, organization/reorganization, and regulations - Planning: formulation of vision, strategy, and road map - Infrastructure and programs: establishing and implementing the needed physical, institutional, and social infrastructure and programs

17. Gross Expenditures on R&D in PPP by Country and as Percentage of Global Expenditures 2010 17

18. The R&D Input Landscape 18

19. Framework for Cross-leveraging Knowledge Assets Across the Asian Region 19

20. Technological Catch-up 20

21. 21  Definition of Technology - Technology is the knowledge useful for production of goods and services.  Importance of Technology - The history of human being is the history of knowledge (science and technology). - Technology and productivity are the main engines of economic growth. - Technology is the main determinant of competitiveness. - Technology affects welfare of individuals and the society. Technology and Development

22. 22 Stages of Industrial Development in the World Agricultural Economy Industrial Economy Knowledge-based/ Innovative Economy Land Labor Natural Resources Capital Labor Management Science & Technology Innovation Entrepreneurship

23. 23 Technology and Development Social Infrastructure, Culture And Institutions Social Infrastructure, Culture And Institutions Economic Growth Technology Development Resources for education, health, communication, Employment Resources for technology development Productivity gains Advances in medicine, communications, agriculture, energy, Manufacturing, etc. Knowledge, creativity Source: UNDP. 2001

24. 24  Two Patterns (Stages) of Economic Growth o Extensive Growth - Increasing production by increasing input of production factors o Intensive Growth - Increasing production by productivity increase (More production is possible with the same resources.)  Technology, Productivity and Economic Growth Technology → Productivity → Trade and Industry → Economic Growth Technology and Economic Development

25. 25 Technology and Economic Growth Creation of Technology Creation of Technology Investment in Technology Investment in Technology Innovation Increase in Productivity Strengthening International Competitiveness Increasing Trade Increase in Productivity Strengthening International Competitiveness Increasing Trade Economic Growth First Stage Second Stage Virtuous Circle (Increase sin Income, Demand, Investment, etc.)

26. 26 120 100 80 60 40 20 0 - Technological innovation plays a key role in productivity increase, long-term economic growth and enhancing living standards. (Innovation is the engine of growth.) Innovation Capability 0 20 40 60 80 100 120 ◆ China Italy ◆ ◆ Mexico Korea ◆ ◆ Japan ◆ Taiwan ◆ German France ◆ ◆ Canada ◆ England ◆ USA Innovation and Economic Performance Relative Economic Performance Note: As of 2000.

27. 27 Two different Development Stages Extensive Growth: Input-driven growth Intensive Growth: Innovation (productivity)-driven Growth - Increase in inputs (e.g. employment, education level, stock of physical capital: mobilization of resources) - Increase in the output per unit of input (e.g. better management, better economic policy, increase in knowledge, technological progress) - Diminishing returns- Constant returns - Limited Growth- Sustained growth - Based on perspiration- Based on inspiration

28. Development Stages in the Korean Economy Stages of Development Aid, Labor intensive production Aid, Labor intensive production 1950s 1970s 1980s 1990s 2000s 1960s Imitation Simple tech. Import of old plant/ machinery Imitation Simple tech. Import of old plant/ machinery Heavy industry Assimilation Minor innovations Heavy industry Assimilation Minor innovations R&D New product development R&D New product development R&D intensive increase in science New product innovation Innovation frontier Agricultural Economy Invesment-driven Economy “Extensive Growth” Innovative Economy “Intensive Growth” Traditional Factor-driven Economy “Extensive Growth” Outward-looking Innovative Catch-up Transition to Innovation- driven Economy Outward-looking Imitative Catch-up 28

29. Science Technology and Innovation  Science is the process of generating knowledge based on logic and evidence.  Technology is the application of scientific knowledge to production, and frequently involves invention, i.e, the creation of a novel object, process or technique.  Innovation is the process bringing together new ideas and technology, or finding novel applications of existing technologies. Generally, innovation means developing new ways of doing things in a place or by people where they have not been used before. Modern innovation is usually stimulated by innovation systems and pathways.  The phrase ‘Science and Innovation’ implicitly includes science, engineering, technology and the production systems which deliver them. 29

30. Five Dimensions of STI Capacity National (and local) government capacity to formulate and implement coherent S&T programs and policies Enterprise capacity to utilize knowledge to innovate and produce higher value added, globally competitive goods and services Technologically and scientifically skilled workforce trained to equipment and production processes Production of new knowledge via R&D Import, adapt, and adopt knowledge produced outside the country Source: Ansu, Yaw, 2007 30

31. STAGE ONE Simple manufact- uring under forei- gn guidance STAGE TWO Have supporting industries, but st -ill under foreign guidance STAGE THREE Management & te- chnology mastere- d, can produce hig -h quality goods STAGE FOUR Full capability in in -novation and pro- duct design as glo -bal leader Vietnam Thailand, Malaysia China-1 Korea, Taiwan, China-2 Japan, US, EU Agglomeration (acceleration of FDI) Creativity Border to Middle Income Economies Stages of Catching-up Industrialization Initial FDI absorption Internalizing parts and components Technology absorption Internalizing skills and technology Internalizing innovation STAGE ZERO Monoculture, sub -sistence agricult ure, aid depende- ncy Pre- industrialization Arrival of manufacturing FDI Poor countries in Africa 31 Source: Kenichi Ohno. 2009

32. 32 Acquisition Assimilation Improvement Creation Stages of Technology Capacity Building Developing Country Newly-Industrializing Country Advanced Country ImitationInternalizationGenerating S&T & R&D Stages Development Stages

33. 33 Imitation Stage Internalization Stage Generating Stage Assimilation of imported technologies Product based innovation Automobile, shipbuilding, DRAM, CDMA, TFT-LCD Path-navigating innovation Fuel cell, 4G mobile handset, next generation vehicle Textiles and consumer electronics The Example of Korea

34. Catch-Up Oriented Industrial Technological Capabilities in Developing Countries Accelerate Enhancement Aim for Independent Innovation Firm-LevelNational-Project-Level Take Leaders as Reference Industry-Level Coordinated Development of System Capability Enhancement External Supports Internal Efforts Capability Enhancement Independent Development Closing to Advanced Level Capability Enhancement Core Technologies, Advanced Technologies… Industry Planning, Policy, Effects Source: Hong, Su, Lu 34

35. R&D Expenditure / GDP by Region 35

36. R&D Expenditures in Asian Countries (in US$ million) Reprinted from: Ismail, M. 2013. p.5. 36

37. High Technology by Sector Reprinted from: Ismail, M. 2013. p.4. 37

38. Knowledge-based Development (KBD)  The central ideas of the KBD - Shifting value creation toward creation and useful application of human knowledge; - Creation, development, and deployment of three types of knowledge assets: knowledge embodied in people (human capital), knowledge embedded in formal or informal structures and processes (structural or process capital), and knowledge, information and support from relationships, linkages and networks (stakeholder capital). - Attention to the three value domains of sustainable development (economic, socio-cultural, and natural) and hence a strategic national perspective for leveraging on a country’s unique mix of financial, intellectual, socio-cultural, and natural capital.  Leveraging on a country’s unique human capital 38

39.  Setting up structural capital that empowers farmers  Innovating new sustainable enterprise models  Knowledge networking for critical capabilities  Building on indigenous social capital for enterprise development  Optimum mix of overseas development assistance, private, and public investment in various forms of capital 39

40. East Asian Regional Initiatives  Formulation of a KBD Model  Focused Anti-Poverty KBD development agenda  Training of economic/development planners and establishment of an e-community of KBD planners in Asia  Cross-leverage knowledge assets across the Asian region  Networking of Asian institutions in knowledge management and organizational learning  Assist in formulating KBE plans  Policy study on cross-border e-commerce 40

41. National Science Strategies-NEA Japan 2001 Knowledge Cluster Industrial Cluster initiatives 2006-2010 3 rd Science Basic Plan Regional Innovation Systems Council for S&T Policy (CSTP) 21st Century Centres of Excellence South Korea 2003 Balanced National and Regional Development Regional Innovation Systems NURI (New University for Regional Innovation) Brain Korea 21 China 2006 11 th National 5year Guidance, Issues of balanced development; Regional Innovation Systems Establishing over 40 economic and technical zones to attract foreign high-tech FDIs; Helping MNCs to establish R&D center 863 plan (80s) Torch program (1988- ) 53 high tech zones Reforms in Chinese Academy of Sciences (CAS) Knowledge innovation program (2001-) 211, 985 1 st, 2 nd phase 41

42. Inter-organisational and Regional Learning ‐ Taiwan – Developing local technological capabilities of SMEs, ITRI; brain circulation between Hsinchu and Silicon Valley and mainland China -Singapore –Big science initiatives, National Research Foundation (NRF), A*Star; attraction of foreign talents and institutes -Daejon/Korea – KAIST, high tech amalgamation and entrepreneurship. R&D concentration in Seoul. 42

43. MNEs and Academic Capabilities: China 750 R&D centres with foreign investment in China in big cities (e.g. Beijing, Shanghai, Guanzhou and Shenzen) in 2005 Re-integration (R&D with production sales) and re-agglomeration (spatially close to each other) in the Beijing-Tianjin city-region Competition for talents in Beijing and Shanghai and decentralising efforts in collaboration with the top universities in the regions Localisation of the MNC R&D centres Intra-country spatial dynamics Building RIS with universities and MNEs 43

44. Global R&D Landscape (2012) 44

45. 45 Interactions in a National Innovation System University Research Institutes Research Institutes Government Industry Indigenous Knowledge Base Indigenous Knowledge Base Global Knowledge Base Global Knowledge Base Knowledge Funding Researchers Graduates Grants Tax Incentives Grants Funding Technology Knowledge Industrial & Technological Deepening Transition to Knowledge Based Economy Sustainable Economic Growth Industrial & Technological Deepening Transition to Knowledge Based Economy Sustainable Economic Growth Funding. Source: Suh. 2000

46. Roles of the Three Main Players  Universities – undertake basic science and technology research – educate scientists and technologists needed by business and government  Governments – design IPR system for business and universities – commission science research e.g. for defense – finance universities, subsidise business R&D  Business (Private) sector – conduct R&D to develop commercial products – launch innovative products – start up new firms to exploit new science 46

47. Conceptualization of the R&D system Source: Jeong Hyop Lee. “Evolution of Republic of Korea’s R&D System in a Global Economy”. 47

48. 48

49. Innovation 49

50. Types of Innovations  Product innovation: introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses. This includes significant improvements in technical specifications, components and materials, incorporated software, user friendliness or other functional characteristics.  Process innovation: implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software.  Marketing innovation: implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing.  Organisational innovation: implementation of a new organisational method in the firm’s business practices, workplace organisation or external relations.  New resources or material: used as inputs of production 50

51. LG Electronics, Samsung Electronics 22.3 (1)Air-conditioners Samsung Electronics, LG Electronics. 14.3 (1)Refrigerators Hyundai Heavy Industries, Doosan Engine Co., STX Heavy Industries 59.6 (1) Large diesel engines for ships Hyundai Heavy Industries, Samsung Heavy Industries, Daewoo Shipbuilding & Marine Engineering Co. 80.0 (1) LNG carriers Hyundai-Kia Motors, GM Daewoo 9.8 (4) Automobiles Samsung Electronics, LG.Philips LCD 46.5 (1) TFT-LCDs Samsung Electronics, Hynix Semiconductor 49 (1)Semiconductors Company World market share % (Rank) Product Petrochemical products LG Chem, SK 45 (1) Industrial Power of Korea (Most recent period) 51

52. Roles of Government and Private in R&D in IT 52 Source : DaeJae Jin

53. 53 Shift in STI Policy in Korea Focus View Resource Allocation Resource Allocation Governance  Strengthening ST capacity  Supporting industrial development  Strengthening ST capacity  Supporting industrial development  Domestic-orientation  Emphasize investment increase  Unbalanced regional allocation  Emphasize investment increase  Unbalanced regional allocation  Government-led  ST personnel initiate  Government-led  ST personnel initiate  Leading KBE  Creating new industries,  Growth engine  Meet social demand  Globalization utilization of foreign resources  Enhancing efficiency of R&D  Balanced regional development  Partnership among government, people, region  Increasing participation of citizens in ST decisions

54. 54 National Innovation Strategy Innovation Resources Innovation Policy Science & engineering workforce Access to higher and postgraduate education Availability of risk capital High quality of information Infrastructure Science & engineering workforce Access to higher and postgraduate education Availability of risk capital High quality of information Infrastructure Subsidy and grant program R&D tax policy Education policy & funding Intellectual property protection policy Openness to international trade and investment Subsidy and grant program R&D tax policy Education policy & funding Intellectual property protection policy Openness to international trade and investment National “Knowledge” Stock National “Knowledge” Stock “Basic” research investments Cumulative innovation record Overall technological sophistication

55. 55 Strategies for Securing National Competitiveness  Acquisition of World-top-class Technologies - Korea should pour more R&D efforts to core technologies and emerging technologies on the basis of strong basic science  World Class Education for HRD - For this and stronger international competitiveness, the Korean education system should be reformed as quickly and broadly as possible  Innovation-driven Economy and Innovation of NIS - Through a balanced and efficient NIS, Korea should realize an innovation- driven economy ahead of China  Active Opening of the Economy - All these require active opening of the economy to the world. The whole country should be a ‘special economic zone’

56. Critical Lessons - Investing in S&T capacity is not a luxury for the rich; it is an absolute necessity for poor countries that wish to become richer – there is no choice. - The time to start investing and building capacity is when you are poor. - Countries at different stages of development, and employing different learning strategies, need to invest in different aspects of S&T capacity – plugging in, catching up, innovating: different tasks and challenges for different stages of development. 56

57. Innovation Approaches  Market-Driven Innovation - Innovation for (Product ⇒ Technology)  Technology-Driven Innovation - Innovation for (Technology ⇒ Product) TechnologyProduct Market Market /Demand PullTechnology/R&D Technology ProductMarket Market /DemandTechnology Push 57

58. (Yen Billion) 58 Comparison of the Operating Profits of Samsung and Japanese Electronics Companies (Jul-Sep, 2009) Source: Compiled from Japanese Newspapers

59. 59 Five Strong Points of Korean Firms Viewed by Japan  Adversary or recession is the period to drive -It is the best time to leap forward when the rival is retreating.  Discard egalitarianism (=everything is equally important) -Concentrate on growing or emerging areas without worrying barriers or difficulties  Commodities rather than products -Instead of enforcing selling technologically superior products, develop commodities wanted by buyers  Do not depend on the domestic market -Always conscious of the world market  Endlessly learning and practice -Diligently learn superior techniques to re-create own capability

60. 60  Outward-looking development strategy - Government policy toward FDI and TT  Focus on indigenous R&D - Government-led industrial development - Industry-targeting - Favoring large enterprises  R&D system biased for large enterprises - S&T for industrialization  R&D system biased toward technology development - Rich pool of well educated HR in ST  High absorptive capacity - Government-led development of S&T infrastructure  Relative importance of GRIs Key Factors of the Korean NIS Development

61. Strengthening innovation systems Increases in government funding for R&D Change in funding and governance of public research –More project funding –More targeting of priority areas (IT, biotech, nano, energy) –Greater use of priority setting Support for business R&D increasing –Entrepreneurship and SME financing –Shift in financing of business R&D away from direct funding and toward tax incentives Strenthening industry-science linkages –Boost patenting & licensing of public research –Proliferation of public/private partnerships –Collaborative research 61

62. Asian-Pacific STI: Different Industry Structures R&D by size of firm Source: OECD, R&D Database, June 2005. R&D by industry sector 62

63. Different Institutional Role in R&D and Innovation By source of fundingBy performer Source: OECD Main Science & Technology Indicators, June 2005 63

64. Human Resources: Researchers Total number of researchers in China = 811,000 in 2002, up from 471,000 in 1991. Most recent figures for US, EU, Japan and Korea in 2001/2 were: 1.2 billion; 1.0 billion, 676 thousand, and 136 thousand, respectively Researchers per thousand have increased in all Asia-Pacific countries, US, and EU. Researchers per 1000 employment Source: OECD Main Science & Technology Indicators, June 2005 64

65. Supplies of Scientists and Engineers Percentage of S&E degrees awarded to women Share of S&E degrees in all tertiary level degrees Source: OECD Education Database, June 2005 65

66. National R&D Priorities in Asia-Pacific Countries AustraliaEnvironmentally sustainability; promotion and maintenance of good health; frontier technologies for transforming industry; safeguarding Australia. JapanLife science, ICT, environment; nanotechnology and materials. KoreaDigital TV & broadcast; displays; intelligent robots; new generation automobiles; semiconductors; mobile communication; intelligent home networks; digital content & solutions; batteries; biomedicine. New ZealandBiotechnology; ICT, creative industries. United StatesHomeland security; networking and information technology; nanotech; priority areas of physics, biology of complex systems; climate, water and hydrogen. Source: OECD Science, Technology and Industry Outlook 2004 66

67. Often Linked to NPSstrategies AustraliaBacking Australia’s Ability Strengthen ability to generate ideas, undertake research; accelerate commercialisation; develop & maintain skills ChinaRevitalizing the Nation through Science and Education Improve opportunities for market-based innovation to improve economic growth and performance JapanS&T Basic PlanBoost economic effects and social benefits of intellectual assets New Zealand I3 ChallengeDefine national needs, strengthen long- term research, extract greater commercial value Source: OECD Science, Technology and Industry Outlook 2004. 67

68. Key Policy Goal: Economic Catch-up Strengthen growth through innovation and adoption of technologies from external sources. Effective inward transfer and technology adoption relies on indigenous adaptation, innovation. Post-1945 development of W. Europe, Japan, East Asian tigers, benefited from inward technology transfer & adoption. Contemporary developing economies can benefit from similar “catchup” strategies. Requires strong links with international sources of knowledge, capital, technology. Investment in physical & human capital to strengthen domestic capacity to modify & improve imported technologies. 68

69. Elements of “Pro-Catchup” Innovation Policy Increase public and private R&D investment, especially in nongov’t R&D per formers (universities, industrial firms). –Support a diverse mix of performers of publicly funded R&D. –Include competition, evaluation in public R&D programs. Strengthen linkages with international sources of knowledge, technology. –Tap into nonresident diaspora. –Support student, scholarly exchange with foreign universities & research institutes. –Support inward foreign investment as a source of technology and comp etition for domestic firms. Support technology adoption by domestic firms, farms. –Public “extension services” in agriculture, services, manufacturing. Increase investment in human capital: –Primary, secondary, & post-secondary education. –Training of the employed workforce. 69

70. US Patent Application Trends 70 Source: USPTO

71. Trends in R&D/GDP 71 Source: OECD

72. Comparison of R&D/GDP 72 Source: OECD, UNESCO

73. Catch-up with US 1970-2010 73 Source: OECD (Constant market prices at 2005 ppps)

74. OECD’s Recommendation for Innovation by Development Level 74

75. Drawing Lessons from Country Experiences  Strong leadership and political will  Clear policy direction and adequate support for implementation  R&D investment  Strengthening linkages with the private sector  Exploring innovative ways of achieving desired outcomes  Use of ICT for marginalized groups - Farmers, poor communities, underprivileged sectors have been provided online support. - Rural kiosks in India, Cybercare in Malaysia, Promotion local products in Thailand, IT education in ROK 75

76. Observations and Lessons - Ability to produce new knowledge (R&D) is important, but the ability to absorb and utilize existing knowledge may be even more important at early stages of development – National systems of economic learning and technology diffusion. - Absorptive capacity of enterprises and labor force must be developed – spillovers (from FDI) are not automatic. -S&T capacity building policies should be devised within the context of an overall industrial development strategy – not separately -Getting basics right-rule of law, business climate, etc. - is absolutely necessary but not sufficient. -Goal of universal primary education should be complemented by expanded access to vocational, secondary and tertiary education. -Political commitment is needed since it takes a long time for capacity building to affect economic development and poverty. 76

77. -A critical challenge is increasing the effective demand for R&D by developing enterprise capacity to innovate and utilize knowledge. - Tension between expanding the supply of skilled workers and the private sector’s demand for skilled workers-chicken and egg / brain drain vs. skill shortage - How firms learn, from whom, and how they innovate is a key issue. -Freer trade and attracting FDI is necessary but not sufficient – spillovers will not occur without accompanying capacity building efforts. - Increased spending on education and/or R&D will not improve economic performance, if there are poor linkages between research institutes and education sector on the one hand and enterprise sector on the other. Linkages, quality and relevance are critical. - Need for focus and realism – don’t spread resources too thin; develop a few niche areas; today’s comparative advantage vs. tomorrow’s needs; existing strengths vs. new competencies – comparative advantage must be created. 77

78. References Brad, Carlos A. P. 2003. “Leveraging the Knowledge Economy”, World Bank (PPT, Google). Crafts, Nick. “Divergence Big Time: Economic Growth Since 1870”, (PPT, Google). Mowery, David C.. 2012. Notes on innovation policy and development. Paic, Alan. 2011. “Enhancing South East Europe Competitiveness through innovation and human capital development”, Bank of Greece-University of Oxford (SEESOX) Conference Athens (PPT, Google). Ray, A. S. & Bhaduri, S. “A game theoretic model of optimum IPR regime and technological capability: Implications of TRIPS for developing countries”, Jawaharlal Nehru Univ., India (PPT, Google). 78

79. Sheehan, Jerry. 2005. “Science, Technology and Innovation in the Asia- Pacific Region: Trends and Policy”. (PPT. OECD) Rodriguez, Francisco & Wilson, Ernest J. III. “Are Poor Countries Losing the Information Revolution?”, University of Maryland at College Park (PPT, Google). Watkins, Alfred. 2005. “Building Science, Technology, and Innovation Capacity for Development”, S&T Program Coordinator HDNED, Presentation to STI Thematic Group (PPT, Google). 79