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Science-Based Economic Development edited by Susan Raymond
Susan U. Raymond
Director, Policy Programs
New York Academy of Sciences
Global experimentation with ways to link science and technology policy to plans for national economic growth has been widespread in the last decade. The recognition that technology is a critical component of increases in productivity- and rising productivity is itself a key to growth-has made the complexity of S&T policy a matter of priority in ministerial hallways and corporate board rooms world wide.
This overview paper is intended to articulate several lessons learned from that experience and to illustrate those lessons with references to specific cases and experiences outside of the United States.
Volumes could be written detailing every experiment at every level of public policy and private initiative in science and technology. This paper is not intended to be a comprehensive inventory. Rather, it is intended to raise common themes and provide concrete examples of successful initiatives-all in the service of enlivening debate and analysis of the evidence.
While every nation must formulate policy within its own specific economic, political and cultural parameters, the experiences of the last decade represent important cross-national opportunities for learning what works" (and what doesn't) so that adjustments and applications can be made in specific national settings. The principles and lessons can rise above geographic boundaries, and help to raise levels of policy learning and to make that learning more efficient. For this reason, this paper is organized neither by nation nor by geographic region, but by cross-cutting issues and lessons. Case material from individual nations is used to illustrate these more general points. This case material is presented in six general topic areas:
The Role of Context
It is important to recognize from the outset that policies targeted at providing a science and technology base to economic development rest within a larger context of social values and national economies.
On the social side, the values embedded in different societies and cultures will affect not only choices among policies, but also the perception of the value of technology itself and the risks associated with it. New technologies, indeed, new knowledge, ushers in the potential for broader social change. For some, that potential will be exciting. For others, it will represent a significant threat to tradition, power, autonomy, or even the basis of historic wealth Technological progress may even introduce new social inequalities, or exacerbate those that already exist. The science and technology policy choices that are made, then, cannot be separated from socio-cultural context.
The role of overall economic policy, political stability, the rule of law, market competition, and a myriad of other macro-policy decisions also set very clear parameters within which S&T policy can (or cannot) link effectively to economic growth objectives. Where tax policy is confiscatory, where property law is non-existent, where monopoly is allowed to thrive, policies aimed at encouraging innovation can neither flourish nor find their forward link to markets and growth. Indeed, larger-order economic policies may themselves define what is feasible for the S&T development link. As Weiss has noted:
Unfavorable economic policies-high protection against foreign competition, high barriers to entry or exit, suppression of competition, grossly distorted prices and incentives-may so suppress demand for improved technology and management as to make investment in science and technology virtually useless in promoting economic growth. Such policies control the scientific and technological development of [a] country; in effect, they become its defacto technology policy. 1
Similarly, "successes" in specific S&T-economic growth links are often also intertwined with supportive macroeconomic policy and the overarching institutional and regulatory structure that encourages and facilitates S&T investment. Clear commercial codes, an independent judiciary, government regulatory policy that encourages commercialization-all are important structures underpinning success for any policy specifically targeted at S&T and its link to economic growth.
Recognizing the importance of context, then, it is also important to recognize, as Paul Romer notes, that specific attention to science and technology is increasingly critical for the emergence of a national innovation system: "No amount of savings and investment, no policy of macroeconomic fine-tuning, no sort of tax and spending incentives can generate sustained economic growth unless it is accompanied by the countless large and small discoveries that are required to create more value from a fixed set of natural resources." 2 Specific concern with innovation, and the link between innovation and the marketplace, requires specific policy attention.
A review of experience from both industrialized and developing economies reveals a series of general lessons or principles which might be usefully held in mind as less developed countries seek to strengthen their innovation systems and forge a productive link between S&T capacity and economic growth in an increasingly competitive global marketplace.
The Long-Term View
Policies targeted at science and technology for purposes of economic growth focus on the long term. A prime example of the importance of patience is the experience of Japan.
Japan 's planning for growth of a knowledge-intensive economic sector accelerated in the 1960s after its origins in the late nineteenth century and in the immediate post-World War II period. In the l960s, Japan combined heavy public investment with clear policy acceptance that returns on those investments would not be seen until the twenty-first century. Japan has invested in developing science "magnets" designed both to encourage expansion of science-based industries and to disperse those centers around the country. But creating the network of "science parks" and high-tech regions (called "technopolises") as well as the transport, educational, telecommunications, and energy systems necessary to serve them, requires time and patience.
An early initiative, the Tsukuba Science City, is located thirty-five miles from Tokyo and twenty-five miles from Narita Airport. Relocating government research institutes to Tsukuba to attract private firms and research laboratories, the Japanese government spent over $17 billion in developing this one science magnet alone. Yet, thirty years elapsed from the time that the first plans for the Tsukuba Science City were approved by the Japanese Cabinet until companies locating in the region grew consistently.
A similar story can be told in Singapore. With the patience to measure time in units of ten, much can be learned and accomplished. In the early 1980s, the Government of Singapore embarked on a strategy to link its economic development to high-technology research and development capacity. The National University of Singapore (NUS), which conducts one-third of Singapore's research, is a central core of that strategy. A decade later, R&D expenditures in Singapore have risen from nearly zero to $300 million per year. Research centers, such as the Institute for Molecular and Cell Biology of the NUS, have put Singapore on the international science map.
The creation of Hong Kongs' new University of Science and Technology is a similar example. Planning for the university began in 1986, with an eye toward creating a center of gravity for collaboration with Chinese scientific institutions when Hong Kong comes under Chinese control in 1997. The university will be fully operational by the year 2000, a decade and a half after plans were laid.
While Singapore and Hong Kong clearly enjoyed other assets beyond patience (an educated population, manageable public bureaucracy, infrastructure), a continued effort to combine an economically-relevant research agenda with a willingness to look a decade ahead in terms of R&D investments has created the stable link between S&T and national economic policies.
South Korea also set out on the development path with a long-term vision. In this case, the underlying theme was an investment in education. Over a thirty-year period, secondary and technical education occupied pride of place in development strategies, with a resultant long-term payoff in technological advance.
The difficulty with taking a long-term view is also clear, however. Ironically, the difficulty is enhanced by the very global changes that call for S&T links to economic growth in the first place. The rise of democracy in developing countries has created an electorate empowered to hold public policy accountable for results. But electorates often do not take a long-term view. Both action and results are often expected to be relatively immediate. While an effective link between S&T policy and economic development may require patience and significant amounts of money), new political systems in poor countries populated by voters who expect visible improvements in the span between elections, may not predispose policy makers to patience.
The obstacles that prevent firms, states or nations from taking a long-term view go beyond the electorate, however. In many developing countries, economic reform itself has shortened horizons. Speculative and rent-seeking activities, focused on maximum gain in a minimum time-frame, are becoming significant economic engines, crowding out technological investments that entail longer gestation periods for economic payoff.
A Partnership Philosophy: Selected Cases Around a Theme
A common thread running through virtually all successful marriages between S&T and economic development is partnership. At the earliest stages, business, universities, and government policy makers forged collaborative relationships to ensure that S&T capacity was strengthened, and that the resultant capacity was linked effectively to the marketplace. The contributions are reciprocal, benefiting both science and the economy.
The lesson has often been learned after false starts. "Getting the science right" may result in discovery, but it will not necessarily produce innovation and increase competitiveness if the marketplace does not want what science wants for it. It is both the "pull" of the market and the "push" of science and technology-all within an encouraging public policy framework-that have characterized the closest collaboration between universities, business, and public policy makers.
In Mexico, there has been virtually no relationship historically between industry and academic or government research centers. Innovation from basic research rarely found outlets in the marketplace. And conversely, without regular access to basic research efforts, industrial investment in R&D was marginal. As a partial result, Mexico's investment in S&T has actually declined since 1980 measured as a percent of constant GDP and is significantly lower than that of its new partners in the North American Free Trade Agreement: Mexico's S&T investment as a percent of GDP is 0.38 percent, compared to 1.4 percent in Canada and 2.69 percent in the United States. Mexico invests the equivalent of $3.00 per capita in S&T, compared to $624 in the U.S. and $241 in Canada. The number of research personnel per 100 jobs is 0.2 in Mexico, 4.3 in Canada and 5.6 in the U.S. Only 8 percent of the patents granted in Mexico in the 1980-1990 period went to Mexican applicants, and only 0.038 percent of the patents granted in 1992 in the U.S. went to Mexican applicants.
Recognizing the need to both strengthen the links between S&T capacity, industrial innovation, and competitiveness, Mexico's new S&T policies emphasize collaboration between industry and the university system. The Presidential Science Advisory Council was created in 1989 with membership from industry as well as universities. The National Committee for Technological Modernization includes membership from government, industry and academia. Ten business incubator programs are underway, and 79 research commercialization projects have been funded by the University/Industry Linkage Program (PREAM.) Additional programs now being designed include outreach to small and medium-sized businesses, efforts to build technological capabilities, and the promotion of venture capital funds focused on technological innovation.
In India, a similar recognition of the importance of university-industry-government collaboration is growing. At independence in 1947, policy emphasis was placed on the development of a broad network of public research institutions and university R&D capacity. The 20 universities that existed in 1947 have expanded so that today they total 157 universities (or "institutions deemed to be universities") and 5500 colleges, almost all formally associated with universities. Historically, the public sector accounted for 85 percent of India's research and development, nearly all carried out through these universities and the 500 national R&D laboratories supported by state governments.
Within increasing global competitiveness and changing political structures, India has given new emphasis to university-government-industry collaboration in research and development. The recognition emerged that, despite its strong position in basic and applied science, Korea, Taiwan, and Singapore were out-performing India in global markets. An examination of government R&D programs found significant problems in research efficiency and productivity in terms of applications in the marketplace. Finally, publicly owned industries were not operating profitably, despite government subsidy.
Hence, Indian S&T policy is now encouraging private R&D investments, permitting greater collaboration between Indian firms and foreign counterparts, and between industry and universities. From only eight R&D programs within industry in 1947, the number has grown to nearly a thousand. Moreover, the growth of R&D linkages into the private sector has dominantly been within small and medium-sized business. In late 1986, of the 943 recognized units of industrial R&D, 833 were in small and medium-sized private firms.
In Singapore, S&T-economic links have also emphasized private sector, university, and government collaboration. In 1991, the National Science and Technology Board created the National Technology Plan to promote science and technology R&D. The emphasis was on creating growth in private sector R&D, and on joint research ventures by universities with both local and multinational corporations. For example, the Grumman Corporation of the U.S. joined with the Nanyang Technological Institute to form the Grumman Int/NTI CAD/CAM Center. The center carries out both research in new manufacturing technology frontiers, and provides services to industry in CAD/CAM and CIM.
In Europe, the experience of the city of Birmingham is illustrative of the importance of a partnership spirit from the very beginning of policy formulation. Between the late 1970s and the early 1980s, Birmingham was in an economic free fall. The city lost over 200,000 jobs, 30 percent of its total. Employment in manufacturing fell by more than half GDP per capita in the region fell from third highest in Great Britain in 1977 to second lowest in 1983. The city council of Birmingham, the University of Aston, and the Birmingham Chamber of Commerce and Industry responded with a coordinated strategy. The city acquired land near the university for a Science Park to encourage the location and development of technology-based industries, including small businesses, and to foster links between the university and business. The city established an independent corporation, Birmingham Technology, Inc., to run the park on behalf of the city council, to whom a percent age of rental income would accrue. The university initiated an aggressive effort to upgrade its own academic standards and become more entrepreneurial. Birmingham's business sector participated as a full partner in identifying business needs and structuring the technology-based response. The chamber also was a full partner with the city council in ownership of the National Exhibition Center in Birmingham, which served to attract corporate trade groups to Birmingham and introduce them to the new technology capacities of the city. By 1993, land values had risen, new business parks were opening up, multinational corporations were relocating to Birmingham, and Birmingham, literally on its economic knees a decade earlier, was a major contender for selection as the location of the Summer Olympics of 2000.
In Africa, precedent for such government-university-private industrial collaboration is less widespread, although relevant initiatives do exist. Mauritius is the oft-cited example of collaboration between universities, government, and the private-sector from the earliest stages of economic development planning. University training pro grams are developed only after close private-sector consultation. Final-year projects of engineering students are selected on the basis of technological needs of local industries. Industrial engineers and managers regularly lecture at the university.
The intensity of global competition, and the rise of private initiatives, have led to innovations elsewhere in Africa. In 1991, for example, Malawi's head of state directed that a Department of Research and Evaluation be established in the Office of the President and Cabinet with the express purpose of ensuring that publicly sup ported R&D activities are "demand oriented" and relevant to the needs of industry. To create an effective collaboration between publicly supported R&D and the private sector, and to encourage private investments in R&D, policy instruments are being developed to provide a system of incentives for S&T partnerships and private initiative.
Difficulties in creating a spirit of partnership from the earliest stages of S&T policy making persist, however, and are often significant.
In many developing countries, simply identifying interested "partners" is problematic. In the private sector, many of the largest S&T-based businesses historically have been multinational corporations. However, in these nations direct collaboration with foreign corporations in economic planning and S&T capacity-building remains a domestic political risk. Yet, multinational corporations have been critical actors in the economies of developing countries. They continue to account for a quarter or more of the manufacturing output in such Latin American countries as Brazil, Mexico and Argentina, as well as in Singapore and Malaysia. They account for a third or more of all manufacturing exports in these countries. In Latin America, multinational corporations account for 40 percent of all exports of machinery. Strategies for including multinationals in the science-economic development strategy are clearly important.
In the local private sector, domestic industry is often dominated by small business, most of which is not S&T- based. Even in larger companies, significant R&D capacity is rare. Further, developing economies lack an "industrial ecology" that facilitates a system of interaction between small corporate innovators and larger producers who adapt that innovation for broader markets.
Business entities do not have a history of arm's-length collaboration with policy institutions, and rarely have pre-existing relationships with university R&D institutions. Uniform standards for quality of product and process are also lacking, further impeding university-corporate linkages.
In the university sector, addressed in greater length in subsequent sections of this paper, tradition has defined "science" and "research" as organically and philosophically separate from "technology" and "development." The purity of scientific investigation, the "push" of science, has often been seen as an end in itself, rather than a larger means to market-driven economic development. Hence, finding the "partner" within a university setting is often difficult.
Public policy, until recently premised on central planning, also finds the pluralism needed for the partnership spirit an ill-fitting cloak. Central planning structures, both those targeted at economic development and those (often separate) targeted at science and technology, were created in "command and control" modes of government behavior. Shifting to roles that emphasize flexible collaboration, shared decision making, and changing private initiatives is often uncomfortable.
In all three sectors, moreover, pre-existing interests in pre-existing ways of thinking and acting can create significant barriers to innovative partnerships. Few broad efforts to involve all stake holders-academic, government, and private-in linking S&T policy to economic ends have been undertaken. The end result is illustrated by the fate of alternative resources of renewable energy in Africa. As Soodursun Jugessur of the United Nations Economic Commission for Africa has pointed out:
Almost every university has published results on research on solar, wind and biomas energy. The technology developed is well known now. But the commercialization of research results is a major problem. Solar water heaters, solar coolers, solar dryers, biomas generators, improved cooking stoves, are all gathering dust as exhibits, for manufacturing capacity is missing. It is only when governments can formulate and apply science and technology policies that can create the necessary enabling environment that local entrepreneurs and foreign investors will find it possible to bring these technologies to the consumers. 3
The Entrepreneurial University: Traditions and New Challenges
In a wide variety of cases, the evolution of the university from impenetrable academic fortress to dynamic player both on the S&T-economic policy stage and in the commercialization process has provided an important impetus to the realization of S&T policies linked to economic objectives. Although the trend for universities to become aggressive economic players may be stronger in the United States than else where, precedents can also be found abroad.
In Taiwan, the National Tsing Hua University is an aggressive collaborator with technology companies located in its home city of Hsinchu and the city's Science Industrial Park. University faculty act both as consultants to local corporations and sources of research innovation which are then commercialized by those corporations.
Both the St. John's Innovation Center of St. John's College and the Cambridge Science Park of Trinity College are the products of efforts of two of Cambridge's oldest colleges to incubate high-tech business and link university research to the commercial marketplace. Cambridge has not historically had links to commercial institutions. Over 70 percent dependent on government grants to finance expenses, and heavily dependent for the remaining 30 percent of operating budgets on philanthropy, however, college leaders have sought mechanisms to create income streams linked to commercialization of university S&T capacities. While the colleges' efforts to create the high-technology incubators have not been universally greeted with acclaim throughout Cambridge, a gradual shift is underway with creation of a Masters of Business Administration program in 1991 and a Programme for Industry to attract corporate managers to specialist courses.
The University of Waterloo in rural Waterloo, Ontario (population 70,000) is one of Canada's premier centers for computer sciences. The university, its faculty, and its students have made a concerted effort to capitalize on the cutting-edge technological research and development going on in the university. Since 1988, undergraduates, graduate students, faculty, and staff have formed more than 75 companies located in the Waterloo region to commercialize advances in the computing sciences. These corporations have helped both to keep the area's computer sciences talent bank in the region, to attract new talent to the university, and to create a range of associated employment opportunities.
In France, one of the critical magnets for attracting corporate investment in Sophia Antipolis, the booming science park in southern France, was the commitment of the University of Nice to invest heavily in mathematics, computer sciences, and physics. The willingness of the university to become a high-tech partner for corporations from all over Europe and from the U.S. provided assurance to corporate R&D managers that academic research facilities would be both able and willing to engage in collaborative research, and would be a source for expanding the region's skilled human resources pool.
In Thailand the highly respected Chulalongkorn University has created "Chula Unisearch" to promote the use of the skills of university staff by outside organizations. The university seeks to establish contractual/consulting arrangements with private enterprise through this mechanism, and also to encourage longer-term research and commercialization opportunities with private enterprise.
In Japan, universities have seldom entered the commercial fray. Indeed, regulations prohibited corporate support for directed university research, and academic institutions remained focused on fundamental research. With a change in regulatory guidelines, however, and increasing shortages of public finance for university laboratories, traditional academic detachment is gradually shifting to closer industrial collaboration. Joint research projects numbered fewer than 100 in 1983. Ten years later, there were more than 1200 such projects. Corporations are financing research, endowing chairs, and equipping laboratories in an effort to take advantage of basic research talent.
In many countries, an entrepreneurial role for the university raises a tension between the autonomy of academic science and the directed, product-oriented demands of the marketplace. For the university, being entrepreneurial often requires a change in what Peter Drucker would call their "theory of business," their assumptions about the environment they serve, their own mission, and their own competence. Such changes, however, are central to becoming aggressive players in the S&T-economic development venue.
Finding a balance between the culture and priorities of academia and the culture and priorities of industry poses a challenge in many settings. The experiences of universities that have sought to convert their research strengths into product development and commercialization, however, point to several special difficulties in adapting this new academic mode to less developed country settings.
First, the global marketplace is rife with alternatives. Universities (administrators, faculty, and staff) must show that their research products and technologies are equivalent or superior to those available from other, global sources. The increasingly interconnected global market for ideas may present opportunities for research institutions in developing countries, but they also face increasingly accessible global competition. University entrepreneurial success entrepreneurial may depend more on national tax policy regarding duties on technology imports than on any underlying academic philosophy.
Second, the university can be entrepreneurial to the extent that the market perceives that it needs research services. As noted above, the fact that much of the commercial infrastructure of many less developed countries is dominated by small and medium-sized business whose product base is not rooted in S&T innovation limits the market for academic entrepreneurship. The nature of the market for innovation, however, argues not for abandoning the concept of entrepreneurial efforts by universities, but for comprehensive market analysis, for aggressive efforts to get closer to the users of technology, and for careful targeting of effort.
Third, the problem of intellectual property creates challenges. Most universities in industrialized countries have established clear policies on intellectual property which allow gain both to faculty innovators and to the university overall. Indeed, such policies often act as incentives for a robust entrepreneurial climate in university research settings. In developing countries, university intellectual property policies are usually not as well developed, nor as keen on providing incentives for an entrepreneurial climate in research settings. Like national authorities, public universities display some ambivalence on these issues. Leadership from the new World Trade Organization of the GATT may help overcome some of these barriers in the long term.
Finally, adapting the entrepreneurial university mode to the conditions of developing countries again raises the issues of the long-term view and long-term investment. Most universities in developing economies cannot act as autonomous decision makers in the national economy. They are closely tied to national budgetary structures, which, in turn, are tied to annual budget cycles. The objective lack of resources, and the periodic budgetary constraints that arise from economic cycles, impede long-term financial commitments to research and innovation within the university sector, as well as confidence in the commercial market that long-term research relationships can be maintained.
Innovative Institutional Arrangements: Experiments under Way
A wide variety of innovations in institutional arrangements among government, academic research sites, and commercial ventures have been initiated to foster the link between S&T capacity and economic growth. In some cases, the arrangements have been built into initial long-term planning for S&T policies that contribute to economic growth. In other cases, these innovative arrangements arise out of immediate problems or opportunities present on the S&T or economic landscape.
One of the most comprehensive approaches to institutional arrangements for linking S&T to economic objectives is represented by South Korea. In the aftermath of the Korean War, the economy faced severe hurdles to development. GNP growth barely kept pace with population growth. The domestic savings to GNP ratio was 3 percent. Per capita income was under $100. Over 65 percent of the work force was engaged in primary industries.
To jump-start a competitive economy, the central government sought to increase the pace of the nation's technological advance. In 1966 Korea established the Korea Institute of Science and Technology (KIST) in the form of an autonomous, multidisciplinary research institute intended to carry out contract research. In 1967 the Ministry of Science and Technology was created to serve as the national central planning and coordinating arm for S&T policy and programs. In 1971, the Korea Advanced Institute of Science was founded, funded chiefly by the ministry, to train high-level scientific professionals. These three institutions, together with an expansive network of vocational training institutes and technical high schools, represented a dense institutional web for linking government policy, research, and industrial innovation. The entire web was underpinned by a formal set of laws that gave the central institutions authority to set priorities for and conditions of policy involvement in the innovation, research, and S&T financing. 4
In all of these cases, the Korean system has sought to ensure linkages between government policy and resources, academic institutions, and private industry. Using tax incentives, grants, exchange programs, licenses, and training opportunities, scientists, researchers, and business executives were encouraged to move among the government-university-business sectors. In turn, central institutions hoped that such efforts would result in close relationships between the "demand" side of the economy's technological needs and the "supply" side of research. At first, the uphill climb was steep. Businesses, many small and most without a technological base, saw little merit in the offerings of the public institutions. The lack of an R&D base made it difficult for corporate executives to see the benefits of the research being offered. In turn. without close business communication, that research capacity could not define the specifics of the "demand" to which it should be responding.
With time, the situation changed. Alter a decade of effort, the combination of increasing competition within Korea and globally, and the consistent and aggressive efforts of Korea's public S&T institutions to reach out to business, bridged the initial gap. Korean policy used such mechanisms as access to licenses, tax considerations, and access to capital to reward industries collaborating with S&T programs and priorities. Simultaneously, it used competition among firms for access to these benefits to encourage efficiency in industry's response to government financial support.
The results are everywhere to be seen in the marketplace. The S&T policy-industry link remains a priority in the Korean government. The 1993-1997 five-year plan sets as one of the country's major tasks the promotion of S&T to enhance the competitiveness of Korean industry in the global marketplace. Public allocations to innovation and R&D are slotted to increase, and scientific and technological cooperation with the U.S. and Japan is being encouraged.
More recently in Thailand a similar concern with the need to link university capacity to industrial needs has been fueled by competitive pressures. Thailand's natural advantages in labor and natural resources has eroded with competition from Vietnam, Indonesia, and China. Creating greater innovation and productivity are critical. Yet Thailand spends only 0.3 percent of its GDP on R&D, compared with 1-2 percent in Korea. Moreover, Thailand's private industrial sector accounts for only 3 percent of the nation's R&D total compared with 80 percent in Korea.
In an overt effort to increase the degree to which innovation is demand-led, Thailand has created the National Science and Technology Development Agency. Over 80 percent of the agency's resources are allocated to funding collaborative research grants between universities and private companies. The hope is that the result will not only be specific product and process innovations, but also a deeper tradition of collaboration between academic S&T capacity and the commercial marketplace that will grow beyond the grants program.
In Indonesia, there have historically been few institutional mechanisms available for organically linking public policy and resources in S&T with the private sector. A new effort is underway to use the "business incubator" concept to create collaborative institutional relationships between public S&T policy and the marketplace. The business incubator is a microfacility with trained management staff. The incubator provides private business the physical work space, shared facilities, and access to technical and business support services in one package of services, credit, technology, and training, often especially targeted to the needs of small business. With assistance from the UNDP's Private Sector Development Program, Indonesia has created a national Incubator Steering Committee, comprised of senior government officials from all relevant ministries and private business executives. This committee itself is an innovation in creating early communication and joint "stake holding" between government and private interests.
Business plans for three pilot incubators are being created-at Serpong in western Java, focused on technology commercialization; at Solo, on regional development; and at Surabaya/Malang in eastern Java, for industrial subcontracting. Another six are planned for the coming years.
In Africa, there is a new appreciation of the need to find collaborative methods for creating what Dr. Thomas Odhiambo has called "demand-driven, science-led, knowledge-intensive social and economic development," 5 through a better interface of academic scientific capacity, industrial applications, and government policy for purposes both of the financing and the implementation of research and development. Toward this end, a new cross-Africa institution, the African Foundation for Research and Development (AFRAND) was created in mid-1994 as an autonomous, continentwide effort to redirect African R&D toward demand-driven productive needs and collaborative, organic relationships with commercial and other operating institutions in the region. AFRAND will operate a research grants and training program toward that end.
AFRAND's Governing Council is to be comprised of senior leaders from government, private commercial, academic, non-profit, and international organizations active in S&T-based industries and programs in Africa. The council sets the policy and broad program priorities, and hence provides a forum for closer communication and partnership between government, industry, and university leaders. The region's most eminent scientists and technologists have been made members of AFRAND's Scientific Assembly to ensure that the focus on the application of S&T to development benefits also draws on the best of the region's academic capacity.
Institutional innovations such as those in Korea, Thailand, Indonesia and AFRAND illustrate the potential for using S&T policy to link governments, universities, and the private sector in long-term relationships targeted at economic development. Many other, often successful, initiatives have created S&T-economic development impacts within specific industries or for specific geographic sires. Targeted tax or export policies, for example, have been effective in parachuting S&T capacity into finite development situations. The city and province of Cebu, the Philippines provides an illustration. The creation of the Macatan Export Processing Zone (MEPZ), together with improvements in the international airport at Cebu, transformed the economic base of the city from one dependent on the production of rattan furniture to one pulsing with semiconductor and electronics investments. Forty seven technology firms are now located in the MEPZ with annual exports of over $300 million.
In many less developed countries, creating deep, sustainable innovation in institutional relationships is difficult. The targeted, singular approach to S&T-economic development is more common. But the resulting pattern of development created by such successes may often best be described as S&T investments "on" rather than in" the local economy. Without deeper, more organic institutional relationships between policy, S&T capacity, and private markets, sustained and spreading science- based development may not achieve its potential to continually add value to products and processes, and hence become the leading edge of economic progress.
The Fundamental Importance of education and a Deep Human-Resource Base
A common element of virtually all S&T-based economic development strategies, no matter how old or how successful, has been attention to human resources capacity. The need to evolve those capacities, moreover, is not fixed at a single point in time. It is a continuous process that must keep pace with ever changing technologies and market expectations.
South Korea itself is facing new challenges in its work force. The need to become ever more competitive globally has driven the need to raise product quality and ensure that such quality is consistent. In turn, this requires a work force that whose skills must constantly improve. South Korea's training institutes must now focus not simply on producing a high-quality technical work force in the next generation, but also on upgrading the skills of current generations of workers and ensuring that new job entrants have access to future skill upgrading.
Singapore is also coping with human resources challenges that are constraining its science-based development plans. Even though Singapore devoted 20 percent of its national budget to education, the country has had to make a concerted effort to attract and repatriate Singaporians from abroad to key leadership positions. Science is now a priority in the educational system at all levels with an emphasis on channeling top-scoring students into graduate programs, and using Singapore's two polytechnic institutes to train the cadre of technicians needed to fill exploding demand from biotech laboratories and industries.
In Thailand severe shortages of skilled personnel represent a critical roadblock to further development progress. For example, colleges and universities annually graduate about 4,000 engineers, but current demand is closer to 7,000 per year. Trained technicians are in even shorter supply. Ad hoc training on the job often produces workers capable of operating a particular piece of high-tech production equipment, but not with a deeper technical base of knowledge that allows future flexibility.
Between the mid-I 960s and the mid-1980s, Brazil experienced an expansion in industrialization that was, in many ways, the envy of the developing world. However, Brazil's pattern of development pointed out the importance of attention to human resource capacities. The industrial expansion in Brazil was based "almost exclusively on the importation of technology and capital," 6 without a simultaneous effort to deepen Brazil's own technical capacity, either in the form of expanded research and development, or in the form of human resources. Hence, the ability of imported growth to nourish internal Brazilian private and quasi-private markets was limited in part by Brazil's own absorptive capacity.
As the human resources experiences above indicate, policy for science-based development is difficult to delimit either in time or in space. Educational policy that reaches all levels and maintains flexibility far into the future is often as critical a component of the S&T-economic development link as explicit institutional innovations focused on S&T or economic strategy themselves. Moreover, while the share of science, engineering, and technical education in overall national educational efforts is a critical factor in linking science and technology to development, educational exposure to S&T is important not only for future scientists, but also for the citizenry at large, as well as for managers, lawyers, and the like. Knowledge about and appreciation of S&T broadly in society and especially among non-science leaders paves a smoother public path for supportive policy-making.
For less developed countries, creating integrated strategies to inject educational policy into the S&T-economic development link is problematic. Resources for education are scarce. Many countries have only recently begun to overcome fundamental problems of illiteracy and access to primary education. Secondary education, and the technical components of secondary education, have not been a development priority for foreign assistance organizations, and hence capital to invest in these educational systems is grossly insufficient to meet future human resources needs for science-based development.
Moreover, for cultural reasons, many educational systems have emphasized the development of high-level scientific scholars rather than skilled technicians. In part this is a product of the culture of universities. In part it is a result of the lack of a large and respected market for lower-level technicians. Overcoming either or both problems will require educational leadership and the encouragement of private enterprise and public policy.
Creative Capital Arrangements
An additional critical piece of the science-based development puzzle is the role of capital finance. Historically, the lack of capital for investment in commercialization, even where innovation could be linked to the marketplace, presented a significant, often overwhelming, barrier to entry. In many regions, this remains the case. In other regions, and in some instances of creative problem-solving, this barrier is beginning to fall, either because capital markets are being encouraged or because particularly innovative experiments are underway.
Certainly, the growth of the capital markets in Asia reflects the former circumstance. In 1987, Asian capital markets, excluding Japan, had a total capitalization of only $195 billion. Markets in Thailand, Malaysia, India, and Indonesia were in their infancy. As policy has encouraged the formation and growth of capital market mechanisms, as globalization has increased transnational flows, and as economic liberalization has unleashed private sector growth, these markets have exploded. Total capitalization in non-Japanese Asian stock markets exceeds $1 trillion in 1994. In India, over 40 percent of external capital requirements of Indian private industry are now met through the Indian stock exchange. Between 1992 and 1993, American investor participation in these non-Japan Asian capital markets quadrupled and totaled $120 billion in 1993. While still relatively high-risk and recovering from a market shake out in 1992-1993, Asia's experience with encouraging and regulating the emergence of capital markets provides lessons in linking capital finance to the ultimate success of science-based development strategies.
Even where markets flourish, however, other experiments are underway to tie capital availability to the university-private sector R&D link. Broad collaboration among universities, government, and the private sector is both possible and productive. For example, in Cambridge, the university, nine colleges, the local authorities, and several financial institutions joined together in 1987 to capitalize two funds, the Cambridge Capital Development Fund and Cambridge Research and Innovation. The funds invest in companies and R&D in the Cambridge geographic area as well as in university projects. A similar fund established in 1990, the Cambridge Quantum Fund, is wholly dedicated to identifying and investing in projects within the university.
In contrast, in the case of the City of Birmingham noted earlier, initial capital development came largely from public institutions. The city's critical role was to gain access to the necessary land and assign that property to the Science Park. The second critical step, however, was to establish a collaborative relationship between the city and national policy. Toward that end, the Birmingham Inner City Partnership Program was developed as a joint central government-city council enterprise. The partnership, with support from the European Regional Development Fund, provided the working capital to establish the small business Science Park.
Experiments with financing institutional innovation, albeit not necessarily in financing commercialization, are also underway in Africa. The African Foundation for Research and Development is to be capitalized from a variety of resources, including bilateral and multilateral donors, private foundations, corporate organizations and the like. AFRAND is also exploring the options for developing "debt-for- science swaps, which would enable bilateral external debt to be apportioned to AFRAND for sale at heavy discount on the secondary market.
In Latin America, innovative financing arrangements for small business have been initiated by a coalition of private Swiss business leaders who in 1985 created FUNDES, a foundation with the objective of promoting entrepreneurship in the region. In partnership with governments and local businesses, FUNDES was capitalized to provide both technical assistance to small businesses seeking, among other things, to improve technologies, but also as the source of credit guarantees for businesses lacking sufficient collateral to access capital. After five years of operation, FUNDES has provided access to bank loans for 750 small entrepreneurs with an overall default rate of less than 3 percent.
Increasingly fluid worldwide capital flows provide a systemic solution to access to capital in many instances. This is particularly true for S&T innovation in economies with a well developed financial infrastructure. In many ways and in many settings, capital does not recognize national borders. In less developed countries, however, barriers to capital access can be deeply. rooted both in the weakness of financial institutions and in general monetary policy. Innovative local initiatives to enhance capital access, and public-private collaboration to share both the risks and rewards of that effort, may prove to be essential to forging productive links between S&T capacity/productivity and the economy.
A Concluding Thought
The integration of institutions, sectors, and interests into collaborative policy for science-based development can appear complex to the point of being daunting. Yet the importance of exerting critical effort toward that end is compelling. Knowledge, and innovation on the basis of knowledge, will underpin future economic progress. Those who make the effort will emerge as leaders in the next century; those who do not may be left behind. Effective innovation-to improve economic performance today and to create economic performance tomorrow-requires a partnership not only among academic, government, and private institutions, but between S&T and economic policies.
References
Note 1: Charles Weiss, Jr., "Scientific and Technological Constraints to Economic Growth and Equity," in Science and Technology: Lessons for Development Policy, edited by Robert E. Evenson and Gustav Ranis (Boulder, CO: Westview Press, 1990). Back.
Note 2: Paul M. Romer, "Implementing a National Technology Strategy with Self-Organizing Industry Investment Boards," Brookings Papers, 1993. Back.
Note 3: S. Jugessur, "Science and Technologyolicy in Africa: Trends and Strategies," paper written for the Brainstorming Meeting on Science and Technology Policy in Africa, Carnegie Corporation of New York, October 31,1994. Back.
Note 4: The Science and Technology Advancement Law of 1967; the Law for the Promotion of Technology Development in 1972; the Engineering Services Promotion Law of 1973; the National Technical Qualification Law of 1973; the Assistance Law for Designated Research Organizations in 1973; and, the Law for the Korean Science and Engineering Foundation in 1976. Back.
Note 5: T. Odhiambo, "Design and Launching of AFRAND, The African Foundation for Research and Development." Keynote address presented at the Forum on Science in Africa: of Capacity-Building, Washington, D.C., May 10, 1994. Back.
Note 6: Clovis Walter Rodrigues, "R&D and Industry-Some Considerations from the Brazilian Experience," in Research and Development Linkages to Production in Developing Countries, edited by Mary Pat Williams Wilveira (London: Westview Press, 1985). Back.
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