Igniting Innovation

Igniting Innovation

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Innovation and technology absorption are now firmly recognized as one of the main sources of economic growth for emerging and advanced economies alike. That is why innovation is seen as a possible catalyst for revitalizing post-transition economies hit hard by the recent financial and economic crisis.
Is government intervention needed to foster innovation in post-transition economies? This is the central question to which this book responds. The answer is yes, but a qualified yes. Innovation activities are rife with market failures that tend to hold back private investment. And badly designed or badly implemented interventions can further hamper the development of an innovative and entrepreneurial culture among businesses and research communities.
This book builds on the lessons from public institutions and programs to support innovation, both successful and failed, from Eastern Europe and Central Asia as well as China, Finland, Israel, and the United States. The lessons highlight the pitfalls of imitating models of government interventions from 'innovative' countries without having adequate systemic governance and institutional reforms. They underscore the need for intensified international R and D collaboration and foreign R and D investment to better integrate post-transition economies in the global R and D community. They spotlight further opening to FDI to encourage knowledge absorption. And they point to the importance of overhauling government support programs--especially financial ones--to address key pressures points along the innovation and commercialization continuum.
We hope that the results and recommendations offered by this book will contribute to the discussion about how to relaunch innovation and technology adoption as a central part of the development and growth strategies of post-transition countries.

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Publié le 22 septembre 2011
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EAN13 9780821387412
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IGNITING
INNOVATION
Rethinking the Role of
Government in Emerging Europe
and Central Asia
Itzhak Goldberg
John Gabriel Goddard
Smita Kuriakose
Jean-Louis Racine This report is part of a series undertaken by the Europe and Central Asia Region of the World Bank.
Earlier reports have investigated poverty, jobs, trade, migration, demography, and productivity growth.
The series covers the following countries:
LithuaniaAlbania
Macedonia, FYRArmenia
MoldovaAzerbaijan
MontenegroBelarus
PolandBosnia and Herzegovina
RomaniaBulgaria
Russian FederationCroatia
SerbiaCzech Republic
Slovak RepublicEstonia
SloveniaGeorgia
TajikistanHungary
TurkeyKazakhstan
TurkmenistanKosovo
UkraineKyrgyz Republic
UzbekistanLatviaIGNITING
INNOVATIONIGNITING
INNOVATION
Rethinking the Role of Government in
Emerging Europe and Central Asia
Itzhak Goldberg
John Gabriel Goddard
Smita Kuriakose
Jean-Louis Racine
Europe and Central Asia Region©2011 The International Bank for Reconstruction and Development / The World Bank
1818 H Street NW
Washington DC 20433
Telephone: 202-473-1000
Internet: www.worldbank.org
All rights reserved
1 2 3 4 14 13 12 11
This volume is a product of the staff of the International Bank for Reconstruction and Development /
The World Bank. The findings, interpretations, and conclusions expressed in this volume do not neces-
sarily reflect the views of the Executive Directors of The World Bank or the governments they represent.
The World Bank does not guarantee the accuracy of the data included in this work. The boundaries,
colors, denominations, and other information shown on any map in this work do not imply any judge-
ment on the part of The World Bank concerning the legal status of any territory or the endorsement or
acceptance of such boundaries.
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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of
the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422;
e-mail: pubrights@worldbank.org.
ISBN: 978-0-8213-8740-5
e-ISBN: 978-0-8213-8741-2
DOI: 10.1596/978-0-8213-8740-5
Cover illustration & design: Romain Falloux
Cover image of Sputnik-1: NASA/Asif A. Siddiqi
Library of Congress Cataloging-in-Publication Data
Igniting innovation : rethinking the role of government in emerging Europe and Central Asia /
Itzhak Goldberg ... [et al.].
p. cm.
Includes bibliographical references.
ISBN 978-0-8213-8740-5 (alk. paper)
ISBN 978-0-8213-8741-2 (e-ISBN)
1. Research, Industrial—Economic aspects. 2. Endowment of research—Europe. 3. Endowment of
research—Asia. 4. Government spending policy. I. Goldberg, Itzhak.
HC79.R4I38 2011
338’.064094—dc23
2011024386Contents
Foreword ix
Acknowledgments xiii
Contributors xv
Abbreviations xvii
Overview 1
Why innovation matters 4
Acquiring technology from abroad 9
Connecting research to firms 12
Restructuring options for RDIs 14
Bringing innovations to market 14
1. Why innovation matters—and what the government
should do about it 19
The rationale for innovation 26
Coping with spillovers 28
Coping with unequal information and the “funding gap” 30
Why the government should play a role 33
2. Acquiring technology from abroad—leveraging the
resources of foreign investors and inventors 39
Cross-border knowledge flows 42
Acquiring foreign technology 54
How well do ECA firms absorb knowledge? 62
Case study: The role of FDI in helping Serbia acquire
technology 69
vvi Contents
3. Connecting research to firms—options for reforming the
public RDIs 81
Incomplete restructuring of RDIs 83
RDIs outside ECA 85
A snapshot of RDIs in ECA 91
Government funding and governance 100
A roster of obstacles 106
A proposed RDI reform strategy 110
Options for restructuring RDIs 112
Options for public funding to support RDI reforms 115
Case Study: Finland’s shift to a knowledge-based economy:
The Role of TEKES 118
4. Bringing innovations to market—boosting private
incentives through public instruments 123
Basic principles of instrument design 125
Basic types of instruments 131
Financial instruments for ECA 135
Institutional support instruments 144
Monitoring and evaluation 148
Conclusion 151
Case study: How Israel has promoted innovation
in recent decades 152
References 157
Boxes
1 Demystifying innovation and absorption 5
2 Poland at a crossroads: Expanding from technology
absorption to broader meanings of innovation 6
1.1 Defining innovation and absorption 21
2.1 A snapshot of coinvention in Poland 53
3.1 Restructuring of RDIs faces important legacy challenges 109
4.1 Catalyzing private sector innovation in Turkey through
an improved institutional environment and financial
instruments 127
4.2 Using grants and loans for innovation support in Croatia 132
4.3 Do matching grants for industrial R&D help the Israeli
economy? 138
4.4 Armenia’s efforts at enterprise incubation 144Contents vii
Figures
1 ECA’s R&D efficiency is still low 8
2 ECA needs to boost its R&D spending 8
3 The expanding role of international coinvention in
the ECA 7 10
4 A call for policy reforms and capacity building 13
1.1 23
1.2 ECA’s researcher population is unevenly distributed 24
1.3 ECA’s R&D efficiency is still low 25
1.4 Corporate ventures and the government play a key role
in the early stages 32
2.1 Innovation and absorption spur growth and productivity 41
2.2 ECA inventive activity on the rise 44
2.3 Hungary and the Czech Republic lead the ECA patents
race 45
2.4 Russian Federation’s patent share could be even bigger
given its size and scientific strength 46
2.5 EU12 losing its edge on China and India 47
2.6 The expanding role of international coinvention in the
ECA 7 48
2.7 Germany dominates ECA coinventions 49
2.8 Expanding role of international coinventions in the
Russian Federation 50
2.9 Revenue and employment trends pre- and post-acquisition 72
3.1 Number of annual publications per RDI staff 97
3.2 R&D and technical services to industry mostly marginal
compared with public funds 98
3.3 Some ECA RDIs generate as much industry revenue as
international benchmarks, but this is not the norm 99
3.4 SMEs could make greater use of RDIs 100
3.5 A bias toward a few types of funding sources 101
3.6 Too few private sector board directors 103
3.7 RDIs’ salaries not attractive enough 106
3.8 Chain of events leading to ineffective RDIs 108
3.9 Factors affecting RDI performance 108
3.10 RDI restructuring strategies 111
3.11 RDI reform decision tree 112
3.12 The less the government funding, the more market
pull dominates 116
3.13 Finland’s business sector is sharply stepping up its R&D 119
3.14 Finland’s successful innovation environment 120viii Contents
Tables
2.1 Top generators of Russia-based U.S. patents 51
2.2 Openness is better: Link between international
interconnectedness and technology absorption 65
3.1 A massive overhaul of RDIs in the 1990s 84
3.2 A successful strategy typically reflects market needs 88
3.3 Foreign comparator RDIs vary in size and ownership 93
3.4 Specializations of the RDIs in the ECA sample 94
3.5 Restructuring options for ECA RDIs 113