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International DevelopmentIdeas, Experience, and Prospects$

Bruce Currie-Alder, Ravi Kanbur, David M. Malone, and Rohinton Medhora

Print publication date: 2014

Print ISBN-13: 9780199671656

Published to Oxford Scholarship Online: April 2014

DOI: 10.1093/acprof:oso/9780199671656.001.0001

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(p.546) Innovation and Technology

(p.546) Innovation and Technology

Source:
International Development
Publisher:
Oxford University Press

This section addresses how thinking about innovation and technology have evolved within international development. At first glance, these topics can appear out of place as the developing world tends to be characterized by the absence of these attributes, while the success of developed countries is popularly attributed to their technological prowess. Yet there is a rich tradition of thinking about how to harness technology for the benefit of developing countries. Following the Second World War, many newly independent developing countries attempted to reduce their reliance on outside production and jump start their own process of technological progress. At the same time, many developing countries face distinct climates, diseases, and conditions to which outside technology is not always well suited. Despite being far from the global hubs of science, developing countries arguably require an ability to address their own problems by creating homegrown and adapting outside technology.

The first decades of development in the 1960s and 1970s were a period of tremendous optimism over the promise of science, as demonstrated by a series of UN conferences which sought to both foster local science and mobilize part of the global science efforts toward development goals. In contrast, later decades would see deep cuts to higher education and research in developing countries under structural adjustment programs. Ironically, the response of OECD countries to the recession, most recently in the late 2000s, was greater investment in innovation and technology, seen as vital to their own future development. Thus thinking on innovation and development has been schizophrenic, an unaffordable luxury for some countries and an indispensable strategy for others. This duality is now breaking down as parts of the developing world contribute a rising share of world research activity, and many more have inserted themselves into global value chains. At the same time, constraints on foreign aid budgets have heightened demand for evidence of “what works” in development and inspired interest in new ways of encouraging innovation.

Looking back, there have been three critical shifts in thinking: an appreciation for innovation encouraged by incentives within the economy; increasing interest in setting an agenda for technology; and a move from funding inputs to rewarding demonstrated outcomes.

(p.547) Endogenous Theory of Economic Growth

Previous generations of thinkers explained economic growth as the accumulation of capital, land, and labor. Yet some growth stems from improvements in how such factors are converted into production through improvements in technology or organization (Helpman 2004). With the realization that part of economic growth lay in such advances, there was increasing attention to the role of scientific progress and new technologies in enabling growth. Polanyi (1962) described “the republic of science” as a world onto itself apart from markets and society. Scientific communities were seen as self-organizing in that each member adjusts, or optimizes, how they invest their skills and time based on the work published by others. Rather than the market principles of price, consumer surplus, and efficiency, this coordination was achieved through the principles of plausibility, accuracy, and originality.

Yet investments in innovation and technology also respond to perceived profit opportunities. Firms that produce new products or use new processes can earn monopoly rents, profits over and above the costs of production. To remain competitive, other firms are forced to learn and adapt these improvements within their own operations. When they do, a new equilibrium is realized, ending the period of monopoly rents for the leading firm (Grossman and Helpman 1991). Investments in innovation and technology vary between industries. Some firms must invest in new designs to get the next generation of products to the market, as there is little demand for old products. For example, tablet computers have reduced the demand for scientific calculators, which earlier displaced slide rules. Firms engaged in aerospace, pharmaceuticals, and information technology must keep up with their competitors. Yet the pressure is somewhat less intense for firms engaged in forestry, health care, or food services.

Exogenous Agenda Setting

Knowledge is also a public good. The market is expected to under-invest in research due to indivisibility, uncertainty, and externalities associated with the creation of new knowledge (Arrow 1962). Some benefits accrue, not to the firms that underwrite research, but to others that copy or use the knowledge derived from it (Helpman 2004). Firms have an incentive to invest in near-market research, yet little incentive to invest in research that cannot be easily captured or utilized. Thus the state has a role to play correcting market failure, funding research that is valuable to the economy and society, but for which the market does not provide an incentive.

Historically, the state has been a strong supporter of research. Such investments could be characterized as an expression of national prestige for being at the forefront of world knowledge. Looking at the United States, Slaughter and Rhoades (1996) describe research funding policy up to the 1980s as an era of Cold War science under a Keynesian welfare state. The policy narrative used to justify research funding was based on winning battles against communism and specific diseases. Although the National Science Foundation continued to (p.548) respond to curiosity-driven research, the majority of science funding was directed through mission-oriented agencies.

Innovation came to be appreciated as evolutionary. Historical decisions to fund one direction over another can open or close future opportunities to advance knowledge. The implication is that different investments can lead in fundamentally different directions, thus firms and governments need some means of determining which direction is more desirable. Over time, influence over the innovation agenda shifted from inside the scientific community and expert opinion (endogenous) into the realm of business strategy and public policy decision (exogenous). This shift has been strengthened by changes in policy instruments and institutional arrangements used to fund innovation and technology.

Funding Inputs or Rewarding Outcomes

Firms and governments face pressure to rationalize their expenditures, which requires them to know more about the effectiveness and efficiency of the activities they fund. As the UNESCO (2010) assessment of world science notes: “in a context of shrinking public funds, politicians and decision-makers sometimes question whether the … research they support is relevant to current public issues, and regret the lack of evidence to inform their policy decisions. In brief, they wonder whether they ‘get value for money’.” A new governance of innovation and technology has emerged that is characterized by market-oriented funding and goals negotiated among policy-makers, stakeholders, and research “consumers.” Whitley and Gläser (2007) note that OECD countries have increased ex-post evaluation of how funded research contributes to strategic objectives. Funders must demonstrate the value of their work, not only in terms of scientific excellence in the eyes of peers, but in terms of its cost-effectiveness, as well as its utility, impact, and relevance to others.

Generic calls to demonstrate “value for money” gloss over potentially incommensurable ways of understanding the utility of innovation and technology. Research can be perceived as a production process and assessed according to the quantity and quality of its outputs. Yet society is arguably more concerned about getting a cure for cancer than having a large number of articles written about it. Rip (2003) suggests there is already a move away from a narrow focus on quality, economy, efficiency, and effectiveness, toward a new interest in the appropriateness of past actions, performance improvement, and strategy development. It is notoriously difficult to demonstrate a return on investment when dealing with complex problems. There is not a simple linear pathway from spending to outcome for many development challenges, such as reducing hunger or improving public health. Instead, the pathways through which innovation and technology can affect change are varied and intricate. What works in one context cannot necessarily be applied in another; for example technologies such as vaccination are less effective in resource-poor settings that lack electricity and refrigerators, or when people are simply unaware of the benefits or suspicious of the risks involved.

(p.549) Looking Ahead

The chapters in this section provide different perspectives on a renewed interest in applying innovation and technology to international development, as a motor of economic growth and addressing the needs of the poorest members of society. Michele Di Maio (Chapter 32) reflects on the rise, fall, and return of industrial policy over time, noting variation between different regions of the developing world and how contemporary opportunities differ from past decades. José E. Cassiolato, Marcelo de Matos, and Helena Lastres (Chapter 33) trace the origins and evolution of innovation theory, distinguishing between a narrow perspective of science and technology, and a broad perspective of economic growth. Bo Göransson, Judith Sutz, and Rodrigo Arocena (Chapter 34) identify historic ideas on the role of universities, and contrast two models of the university: as a marketplace of skills and innovation for industry, and as contributing to development by solving social challenges. David Brook, Peter Singer, and Caitlyn MacMaster (Chapter 35) describe an evolution in financial mechanisms, moving from grants to stimulate ideas, to prizes and entrepreneurial approaches intended to encourage and scale innovation. Finally, Ronaldo Lemos and Joana Ferraz (Chapter 36) examine the recent history of information and communication technologies for development (ICT4D), which has turned to new business models, defining how connectivity empowers poor people, and new challenges of protecting rights and freedoms.

References

Arrow, K. (1962). “The Economic Implications of Learning by Doing,” Review of Economic Studies, 29: 155–73.

Grossman, G. M. and E. Helpman (1991). Innovation and Growth in the Global Economy. Cambridge, MA: MIT Press.

Helpman, E. (2004). The Mystery of Economic Growth. Cambridge, MA: Harvard University Press.

Polanyi, M. (1962). “The Republic of Science.” Minerva, 1: 54–73.

Rip, A. (2003). “Societal Challenges for R&D Evaluation,” in P. Shapira and S. Kuhlmann (eds.), Learning from Science and Technology Policy Evaluation. Cheltenham, UK: Edward Elgar.

Slaughter, S. and G. Rhoades (1996). “The Emergence of a Competitiveness Research and Development Policy Coalition and the Commercialization of Academic Science and Technology,” Science, Technology and Human Values, 21: 303–39.

UNESCO (2010). World Social Science Report. Paris, France: UNESCO.

Whitley, R. and J. Gläser (2007). The Changing Governance of the Sciences: The Advent of Research Evaluation Systems. Dordrecht, Netherlands: Springer.