The Mexico City Roundtable on OECD’s Innovation Strategy

The Mexico City Roundtable on OECD’s Innovation Strategy 2 nd Forum on Innovation for Competitiveness Andrew Wyckoff OECD / STI 7 January 2010

Overview
The OECD Innovation Strategy
The Innovation Imperative
The changing nature of innovation
Implications for policy
Concluding remarks for Mexico

1. OECD’s Innovation Strategy

A multidisciplinary approach

2. The Innovation Imperative

Pre-crisis slowdown in productivity

Innovation offers the largest potential for catching up Decomposition of cross-country differences in GDP per capita into their determinants, 2005 (United States = 100 ) GDP PPP per capita TFP Human capital Physical capital Employment United States 100.0 100.0 100.0 100.0 100.0 Canada 83.5 72.0 103.3 105.8 106.0 Japan 72.6 52.6 100.4 130.7 105.1 China 9.8 13.6 57.3 105.2 119.5 India 5.2 12.7 47.7 98.3 87.1 Brazil 20.5 29.3 70.1 103.1 96.8 Russian Federation 28.6 31.5 84.9 97.4 99.3 EU27 + EFTA 64.7 67.8 91.2 114.1 91.3 Total World 22.8 27.9 64.2 104.2 95.8 Source: OECD .

The need to support innovation grows due to the crisis.

2. The Changing Nature of Innovation what, how, where & who

What innovation encompasses has changed…
Expansion to services, including non-market services like public sector services;
Broader than just R&D to include non-R&D innovation like design, marketing, organisational innovation;
Applied to social issues – e.g. climate change – not well supported by market mechanisms

… to include non-tech innovators … Source: OECD based on Eurostat, CIS-2006 (April 2009) and national data sources . Share of non-technological innovators by sector

Share of business R&D by technological intensity (manufacturing, 2006) … a wide cross section of industries…

(indexed on 1980=1.0, Annex 1 ratification countries) ...and applications to social issues. Patenting in climate mitigation technologies relative to all sectors

How innovation is conducted has changed…
Increasingly at the intersection / interaction of separate borders: disciplines; geography and institutions
Cost pressures, competition and desire to reduce risk have led to more open / collaborative strategies;
Premium and competitive advantage attached to tacit knowledge: know-how, organisational capital, access to networks.

There is more collaboration among scientists... Trends in co-authorship in scientific publications Domestic single authors Domestic co-authors International co-authors International Single author

Share of companies collaborating in innovation activities, by size Source: OECD based on Eurostat, CIS-2006 (April 2009) and national data sources . ...and between firms...

… who are employing “open innovation” strategies for competitive advantage.
Items shipped on behalf of sellers who utilized Fulfillment by Amazon (FBA): 3x from 2008
Amazon Web Services (AWS): 300k users
100k approved apps , up from 65k in August
estimated 2.5b$US iPhone “apps economy”*
Q3 ‘09 Q3 ‘09 * www.gigaom.com 27/08/09 “How Big is the iPhone App Economy?”

Where innovation occurs has changed…
MNEs still play a huge role; but increasingly more than just “D” abroad;
Increase in x-border links;
Rise of China and India.

...as global innovation networks emerge...

2004-06 1996-98 PCT patent applications with co-inventors located abroad
( ...including Mexico…)

… as well as new global players... Contributions to growth in global R&D (in billion constant US PPP and %) Note: (1) Australia, Canada, Iceland, Korea, Mexico, New Zealand, Norway and Turkey (2) Argentina, Brazil, India, Israel, Russian Federation, Singapore, South Africa, Chinese Taipei Source: OECD. 1996-2001 2001-2006

...that alter the topography of innovation. Broad based Leaders Narrow Leaders / Adopters Adopters / Followers

What drives innovation has changed…
Global market for the highly-skilled;
Not only the “I” but now the “C” in ICTs;
Global Challenges: climate change, health care, food security, development;
Eco-system: not only the supply side (R&D, facilities, SET) but also the demand (procurement, “vouchers” and lead users)
Not just a “National System on Innovation” but also a collection of regional / local innovation systems that directly link to global innovation networks

...labour markets for the highly-skilled are globalising… Growth in the number of tertiary education students enrolled outside their country of citizenship worldwide (millions) Source: OECD and UNESCO Institute of Statistics

… and ICT (especially the Internet) has altered the nature of innovation.

...and global challenges will exert a large “demand-pull”. Potential technological contributions to CO 2 emission reductions Source: IEA.

The actors involved in innovating have broadened…
A range of firms and industries – not just large and high-tech;
Wide range of actors needed – not just SET but entrepreneurs and non-profits;
A range of Ministries and public agencies, and all levels of government;

… forcing a “rethink” of how to manage and govern innovation. Finland’s Governance of Innovation Policy

3. Implications for Policy: the OECD IS Policy Principles

1. Empowering people to innovate
Providing education and training: hard and soft skills, including entrepreneurship
Motivation and space for innovation to flourish:
Competition & empowering consumers
Solid, predictable institutional framework that supports entrepreneurs:
Effective and sustained public / private sharing of the costs & risks of innovation.

Providing an infrastructure for a networked-based innovation system
Policy must seek to erect bridges between the different parts, forming or joining a network – either locally or globally.
Soft skills are needed that can traverse disciplines, cultures and organisations.
Building networks through mobility.
Exploiting modern communication capabilities.
Providing a modern and reliable knowledge infrastructure and platforms for innovation
Facilitating knowledge flows and fostering the development of knowledge networks and markets

Capturing value locally while tapping into global networks of innovation.
Build absorptive capacity : skills, institutions, access to networks
Universities are an essential node in innovation systems that can be the glue between actors and a local anchor into global networks.
Building on existing strengths for dynamic comparative advantage through innovation

4. Improve the governance of policies for innovation.
A broader conceptualisation of innovation requires a re-think of governance mechanisms to improve coherence;
Across ministries and levels of government;
Need for strong political leadership;
Need for measurement and evaluation frameworks to support policy.

Adapt to a post-crisis environment
Step up competition enforcement so that “creative destruction” can occur and new players can emerge
Use of procurement as a “demand-pull”
Stretch resources through co-operation / collaboration / PPPs and public depositories of information
Transform global challenges into innovative opportunities (e.g. Biodiversity; water management; food security).

4. Concluding Remarks: relevance of the IS principles in the Mexican Context

Governance : sustained commitment, continuity & leadership;
Globalisation : tapping into global networks to complement domestic capabilities in priority areas and Mexican Diaspora;
Entrepreneurship & Education : remove obstacles and nurture an entrepreneurial culture in the young.

E-mail comments & ideas:
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www.oecd.org/innovation/strategy
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The Mexico City Roundtable on OECD’s Innovation Strategy

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The Mexico City Roundtable on OECD’s Innovation Strategy — Presentation Transcript