Choosing and Designing R&D and Innovation Policies to Enhance Growth: some comments

1. Choosing and Designing R&D and Innovation Policies to Enhance Growth:some comments Luc Soete UNU-INTECH and MERIT, University of Maastricht “R&D and Innovation in the Development Process: a new look at theory, evidence and policies”, Universitat Pompeu Fabra, June 10th, 2005

2. Couple of comments • Primarily inspired by current EU debate and various contributions of yesterday and today: • R&D, innovation and specialisation • Implicit normative biases in linear model • National structural reform policies of public research: need for “activating” knowledge policies

3. R&D&I and specialisation • EU-25 composed of majority of small countries • Barcelona target of 3% at individual country level rather meaningless • Opposite question at national level: opportunities for free riding in R&D • How to organize R,D&I specialisation within EU-25? • “Backing winners”? • But quid about dynamics? “Backing challengers”?

4. “It is worthwhile to remark that the knowledge of the men of science, indispensable as it is to the development of industry, circulates with ease and rapidity from one nation to all the rest. And men of science have themselves an interest in its diffusion; for upon that diffusion they rest their hopes of fortune and, what is more prized by them, of reputation too. For this reason a nation, in which science but little cultivated, may nevertheless carry its industry to a very great length, by taking advantage of the information derivable from abroad. But there is no way of dispensing with the other two operations of industry, the art of applying the knowledge of men to the supply of his wants, and the skill of execution. These qualities are of advantage to none but their possessors; so that a country well stocked with intelligent merchants, manufacturers and agriculturists has more powerful means of attaining prosperity, than one devoted chiefly to the pursuit of the arts and sciences. At the period of the revival of literature in Italy, Bologna was the seat of science, but wealth was centered in Florence, Genoa and Venice.” Jean Batiste Say, Treatise on political economy, 1803, Book I, Chapter 6, para 15 Inspired by Joel: some old questions

5. Normative bias in R&D policy • EU FP tradition of “pre-competitive” research could be described as a variant of Pasteur’s “use(EC)-inspired basic” in Stokes R&D Matrix… • Implicit strong linear bias in EU R&D policies: • focus on stronger IPR and increased subsidies for basic science (e.g. ERC) • Ultimately pre-competitive research as “never landing” R&D policy in Romer’s terms? • Limited role users in FP programmes at the centre of European innovation paradox?

6. National reform policies • Marimon-Quadrini model applied to Europe’s large R&D firms public labs and universities: • Looks more like “over-commitment” of investors (private as well as public) • Opposite of “hold up”: golden cage entrepreneurs • Need for “activating” knowledge policies at national level similar to activating labour market policies in the 80’s and 90’s • Recognition of unused knowledge potentials which need to be activated (chimney growth effects) • Covering full spectrum of knowledge creation and use: open innovation • Includes both public sector and private sector • National R&D competition policies

7. Role of Foreign R&D