BRICS and Development Alternatives: Innovation Systems and Policies available in Hardcover
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About the Author
José Eduardo Cassiolato is Coordinator of RedeSist and Professor at the Institute of Economics, Federal University of Rio de Janeiro, Brazil. He is also a member of Globelics Scientific Committee – a Global Research Network on the Economics of Learning, Innovation and Competence.
Virginia Vitorino is policy officer at the European Commission, Directorate-General for Research, International Cooperation Directorate.
Bengt-Åke Lundvall is Professor in Economics at the University of Aalborg. He has worked on science and technology issues in relation to employment and international competitiveness and currently concentrates on innovation theory, national systems of innovation and competence building and on the analysis of the economics of knowledge.
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BRICS and Development Alternatives: Innovation Systems and Policies
By José Eduardo Cassiolato, Virgínia Vitorino
Wimbledon Publishing CompanyCopyright © 2009 European Communities
All rights reserved.
SCIENCE, TECHNOLOGY AND INNOVATION POLICIES IN THE BRICS COUNTRIES: AN INTRODUCTION
José E. Cassiolato and Helena M. M. Lastres
The crisis that has hit the world economy since 2008 has lent support to suggestions put forward previously that a significant share of the growth potential of the world economy resides in a few large less developed countries. Brazil, Russia, India, China and South Africa (BRICS) have such potential. More than just that, the BRICS countries are thought to have the capacity to 'change the world' on account of both the threats and the opportunities they represent from the economic, social and political points of view.
International agencies and analysts suggest that investors should pay careful attention to the opportunities offered by these countries. In such analyses, the focus has been restricted to identifying investment possibilities in the BRICS production structures and examining the prospects offered by their consumer markets. This book is part of a study — the BRICS project — where the interest in analysing the BRICS goes much further. These countries present significant development opportunities, as well as several common characteristics and challenges. Identifying and analysing them may help to uncover possible paths for fulfilling their socio-political and economic development potential. More importantly, it can also reveal development alternatives that might help both developed and underdeveloped countries to overcome the problems brought by an exhausted production and consumption system and a malignant regulatory and financial regime.
The BRICS project is an investigation conducted by the Global Research Network for Learning, Innovation and Competence Building Systems — Globelics — and the Research Network on Local Production and Innovation Systems — RedeSist — at the Economics Institute of the Federal University of Rio de Janeiro, Brazil. It is carried out by researchers from the five countries. The central focus of the study is a comparative analysis of the national systems of innovation (NSIs) of Brazil, Russia, India, China and South Africa.
Conceptually, the project is structured around the systems of innovation (SI) framework. The notion of innovation system has at its centre the industrial, S&T and education subsystems, but includes also the promotion, financial and regulation subsystem, as well as other spheres connected to the national and international contexts where knowledge is generated, used and diffused. The objective is to characterise and compare the NSIs of the five countries, pointing out convergences, divergences and synergies and identifying connections both actual and potential.
This book presents a discussion of recent science, technology and innovation (STI) policies pursued by the BRICS, using the broad understanding of the NSI approach as a general analytical framework. In this approach, delineated in section 2 of this chapter, the effectiveness of policies directed towards STI depends on a wide-ranging set of factors that includes the historic specificities of each country, its position in the world hierarchy and the existing general macroeconomic framework, context and policies. Besides stressing the importance of the innovation systems concept for an analysis of STI policies, with an emphasis on contributions by several authors from the developing world, this introductory chapter offers a general picture of the BRICS, pointing out their present relative importance and strength in section 3, and bringing forward in section 4 elements of their STI policies that will be dealt with in more detail in the country chapters. Section 5 sets out the concluding considerations of the chapter.
2. The Systems of Innovation Framework and its Importance to Development
Some of the most fruitful thinking developed in advanced countries in the last 30 years came from a resurrection and updating of earlier thinking that emphasised the role of innovation as an engine of economic growth and the long-run cyclical character of technical change. In 1982, Freeman's paper pointed out the importance that Smith, Marx and Schumpeter attached to innovation (p. 1) and accentuated its systemic and national character (p. 18). He also stressed the crucial role of government policies to cope with the uncertainties associated with the upsurge of a new techno-economic paradigm and the very limited circumstances under which free trade could promote economic development. Since it was formulated in the 1980s, the SI approach has been increasingly used in different parts of the world to analyse processes of acquisition, use and diffusion of innovations and to guide policy recommendations.
Particularly relevant in the SI perspective is the fact that since the beginning of the 1970s, the innovation concept has been widened, to be understood as a systemic, non-linear process rather than an isolated occurrence. Emphasis has been given to its interactive character and to the importance of (and complementarities between) incremental and radical, technical and organisational innovations and their different and simultaneous sources. A corollary of this argument is the specific and localised character of innovation and knowledge. Innovation should then be understood as the process by which firms master and implement the design and production of goods and services that are new to them, irrespective of whether or not they are new to their competitors — domestic or foreign, is particularly important for the analysis of innovation in less developed countries (Nelson 1993, Mytelka 2000).
This understanding helps to avoid overemphasis on R&D in the innovation process, encouraging policy-makers to take a broader perspective on the opportunities for learning and innovation in small and medium-sized enterprises and in the so-called traditional industries (Mytelka & Farinelli, 2003). Understanding innovation as a localised, context-specific and socially determined process implies, for instance, that acquisition of technology abroad is not a substitute for local efforts. On the contrary, a lot of knowledge is needed to be able to interpret information, select, buy (or copy), transform and internalise technology.
Systems of innovation, defined as a set of different institutions that contribute to the development of the innovation and learning capacity of a country, region, economic sector or locality, comprise a series of elements and relations that link together the production, assimilation, use and diffusion of knowledge. In other words, innovation performance depends not only on firms' and R&D organisations' performance but also on how they interact, among themselves and with other agents. Innovation capacity derives, therefore, from the confluence of specific social, political, institutional, and cultural factors and from the environment in which economic agents operate. Different development trajectories contribute to shaping systems of innovation with quite diverse characteristics requiring specific policy support.
It is this understanding of the systemic nature of innovation that allows two crucial dimensions of the SI approach to be explicitly discussed: the emphasis on historical and national trajectories and the importance of taking into account the production, financial, social, institutional and political contexts, as well as micro, meso and macro spheres (Freeman, 2003; Lastres, Cassiolato & Maciel, 2003). Although all of these contexts are relevant for discussions about development, two in particular should be singled out that are pertinent to this paper. One is the financial context, recognised by Schumpeter (1912) in his Theory of Economic Development. For him entrepreneurs, to become the driving force in an innovation process, must be able to convince banks to provide the credit to finance innovation. In this sense, any discussion about systems of innovation has necessarily to include the financial dimension. The other is the idea that space matters, that analysing systems of innovation should be done at the national (Freeman, 1982; Lundvall, 1988) and local levels (Cassiolato, Lastres & Maciel, 2003). Such territorial dimension of SI should vitally include how these systems are influenced by (and influence) their various modes of insertion in the international geo-political context.
The national character of SI was introduced by Christopher Freeman (1982, 1987) and Bengt-Ake Lundvall (1988) and has been used as an analytical tool and as a framework for policy analysis in both developed and underdeveloped countries. As a result, research and policy activities explicitly focusing on SI can be found in most countries and a rapidly growing number of studies of specific NSIs have been produced. Although some authors tend to focus on the NSI in a narrow sense, with an emphasis on research and development (R&D) efforts and science and technology organisations, a broader understanding of NSI (Freeman, 1987; Lundvall, 1985) presents a number of advances. This approach takes into account not only the role of firms, education and research organisations and STI policies, but includes government policies as a whole, financing organisations, and other actors and elements that influence the acquisition, use and diffusion of innovations. In this case emphasis is also placed on the role of historical processes — which account for differences in socio-economic capabilities and for different development trajectories and institutional evolution — creating an SI with very specific local features and dynamics. As a result, there are good reasons for examining the national character of SI.
Figure 1.1 is an attempt to show both the narrow and the broad perspectives on NSI. The broad perspective includes different, connecting subsystems that are influenced by various contexts: geopolitical, institutional, macroeconomic, social, cultural, and so on. First, there is a production and innovation subsystem, which contemplates the structure of economic activities, their sectoral distribution, degree of informality and spatial and size distribution, the level and quality of employment, the type and quality of innovation effort. Second, there is a subsystem of science and technology, which includes education (basic, technical, undergraduate and postgraduate), research, training and other elements of the scientific and technological infrastructure such as information, metrology, consulting and the intellectual property regime. Third, there is a policy, promotion, financing, representation and regulation subsystem that encompasses the different forms of public and private policies both explicitly geared towards innovation or implicit, i.e. those that, although not necessarily geared towards it, affect strategies for innovation. Finally, there is the role of demand that most of the time is surprisingly absent from most analyses of SI. This dimension includes the pattern of income distribution, the structure of consumption, social organisation and social demand (basic infrastructure, health, education).
This portrayal of the national innovation system framework is a corollary of the understanding that:
innovation capacity derives from the confluence of specific economic, social, political, institutional and cultural factors and from the environment in which they operate, implying the need for an analytical framework broader than that offered by traditional economics (Freeman, 1982, 1987; Lundvall, 1985);
the number of firms or organisations such as teaching, training and research institutes is far less important than the habits and practices of such actors with respect to learning, linkage formation and investment. These shape the nature and extensiveness of their interactions and their propensity to innovate (Mytelka, 2000; Johnson & Lundvall, 2003);
the main elements of knowledge are embodied in the minds and bodies of agents or embedded in the routines of firms and in relationships between firms and organisations. Therefore, they are localised and not easily transferred from one place/context to another, as knowledge is something more than information and includes tacit elements (Lundvall, 1985);
the focus on interactive learning and on the localised nature of the generation, assimilation and diffusion of innovation is in opposition to the idea of a supposed techno-globalism. The understanding of innovation as a context-specific process implies that the acquisition of foreign technology abroad is not a substitute for local efforts (Cassiolato & Lastres, 1999);
the national framework matters, as development trajectories contribute to shaping specific systems of innovation. The diversity of NSIs is a product of different combinations of the main features that characterise their micro, meso and macroeconomic levels, as well as the links between these levels (Freeman, 1987; Lastres, 1994).
The particular importance of policies during the advent and diffusion of a new techno-economic paradigm is also stressed. For authors such as Freeman and Perez, development proceeds in long waves, the pivot of which lies in technological revolutions. They thus build on Schumpeter's theories of long cycles in economic development and his exploration of 'creative gales of destruction'. Chris Freeman and Carlota Perez, who developed further these ideas (Freeman, 1987; Perez, 1983; Freeman & Perez, 1988, Perez, 1988), point out that changes in the techno-economic paradigm (TEP) — pervasive transformations with a major influence on the behaviour of the entire economy and society — are essential to explain periods of economic growth and crisis. While fuelled by revolutionary technological opportunities it takes time for a new paradigm to crystallise and even longer for it to diffuse right through the economy. Crises are seen to arise when there is a mismatch between the emerging new paradigm and the old institutional framework. Public and private policies are essential to internalise the benefits of the new paradigm and minimise its costs.
In their paper to the Rio Globelics Conference, Reinert and Reinert (2003) warned against the abuse of the IS perspective in academic and policy circles. They mentioned that 'by integrating some Schumpeterian variables to mainstream economics we may not arrive at the root causes of development. We risk applying a thin Schumpeterian icing on what is essentially a profoundly neoclassical way of thinking' (p. 63). Their point was that development ideas and policy proposals that have been spreading over the last few years are just attempts to introduce the fashion around innovation and knowledge in frameworks of analysis that still emphasise that: (i) both theory and policy recommendations are independent of context; (ii) the economy is largely independent from society; and (iii) there is no distinction between the real economy and the financial economy. In other papers (Lastres & Cassiolato, 2004, 2005) we discuss some of the important policy misunderstandings that derive from such attempts.
From the specific point of view of less developed countries (LDCs) the usefulness of the SI approach resides precisely in the fact that (i) its central building blocks allow their socio-economic and political specificities to be taken into account and (ii) it does not ignore the power relations in discussing innovation and knowledge accumulation. As this book argues, these features are particularly relevant in the analysis of the BRICS' innovation systems. As the analysis of economic phenomena also takes into consideration their social, political and historical complexity, policy prescriptions are based on the assumption that the process of development is influenced by and reflects the particular environment of each country, rather than recommendations based on the reality of advanced countries.
A number of development studies have followed these ideas, arguing that technical change plays a central role in explaining the evolution of capitalism and in determining the historical process through which hierarchies of regions and countries are formed. Furtado (1961), for instance, established an express relationship between economic development and technological change, pointing out that the growth of an economy was based on the accumulation of knowledge and understood development within a systemic, historically determined, view. Although original, these contributions are in close correspondence with Myrdal's (1958) proposition that (i) contexts and institutions matter; (ii) positive and negative feedbacks have cumulative causation; and (iii) cycles may be virtuous or vicious, as well as with Hirschman's (1958) point that interdependencies among different activities are important.
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Table of Contents
ContentsList of contributors, vii,
Foreword The BRICS Countries and Europe Bengt-Åke Lundvall, xv,
1. Science, Technology and Innovation Policies in the BRICS Countries: an introduction José Eduardo Cassiolato and Helena Maria Martins Lastres, 1,
2. Achievements and Shortcomings of Brazil's Innovation Policies Priscila Koeller and José Eduardo Cassiolato, 35,
3. Prospective Agenda for Science and Technology and Innovation Policies in Russia Leonid Gokhberg, Natalia Gorodnikova, Tatiana Kuznetsova, Alexander Sokolov and Stanislav Zaichenko, 73,
4. Science, Technology and Innovation Policies in India: Achievements and Limits K. J. Joseph and Dinesh Abrol, 101,
5. Science and Technology and Innovation Policy in China Xielin Liu and Jianbing Liu, 133,
6. The South African Innovation Policies: Potential and Constraint Glenda Kruss and Jo Lorentzen, 163,