Innovation and development: Going to Mars, and more

Last week, NASA tested the resistance of Orion, a spacecraft with habitats for potential Mars trips. The operation cost $370m.

This flight test brings the USA closer to the target of sending the first human expedition to Mars by 2030.

In September, the first Indian satellite entered the Mars orbit, costing the Indian government 4.5bn rupees ($74m), less than was spent to make the movie Gravity. Only the USA, Russia, and Europe had successfully completed a Mars mission before (while Japan and China have failed). In October (when everybody was preoccupied with the Argentine debt), Argentina was launching its first home-built communications satellite, the first Latin American satellite made with local technologies. These are remarkable results for emerging countries like India and Argentina and underline the importance of promoting capabilities’ accumulation and innovation as part of an industrial policy.

Three recent events underline their importance

My colleague Isabelle Ramdoo and I participated in the second meeting of the E15 Initiative on ‘Reinvigorating Manufacturing: New Industrial Policy and the Trade System’. In my contribution on industrial policies in lower-middle income countries, I focused on the role of capabilities as a key condition of industrial policy success. By allowing for innovation and upgrading, capabilities affect the long-term success of any industrial policy.

For example, the success of the Indian pharmaceutical industry was enabled by the 1970 patent reform that permitted reproduction of overseas-patented drugs. Reverse engineering of existing drugs, however, would not have been possible if the Indian pharmaceutical industry had not accumulated sufficient capabilities beforehand. These capabilities were built through a science-oriented education system, a history of medicine production, and two state-owned enterprises that created demand for skilled labour and contributed to the emergence of a solid private sector by passing their knowledge on to the private sector and by spinning off new firms.

The role of capabilities in development was also among the key topics of the UNU-MERIT Conference on Innovation and Governance that I contributed to at the end of November.

There were three main points to take away from that conference

Firstly, while figures of R&D expenditures show that R&D activities are still concentrated in the North, industry and firms dynamics point at a number of cases where firms in developing countries have accumulated capabilities to benefit from windows of opportunities and have succeeded in the global market (e.g. see the case of Embraer in Brazil, or the case of South Africa as an emerging global wine producer).

Secondly, industrial policies play an important role in spurring learning and capability accumulation. These policies increase productivity and allow for export diversification. Higher productivity and export diversification affect economic growth and allow resource-rich developing countries to escape from Dutch disease types of issues. Various policy instruments can be used in this regard. Some of these instruments have a more direct impact on innovation (e.g., R&D grants and subsidies). Some others have a less direct impact (e.g. establishment of training centers and industrial parks).

Thirdly, talking about innovation for development requires asking what forms innovation takes in developing countries and how they matter – this is especially true because most developing countries are further away from the technological frontier than India or Argentina.

This ultimately means rethinking definitions and performance indicators. While these have already changed almost fifteen years ago when Latin American started to carry out innovation surveys; today, similar efforts are undertaken in Africa, where 14 countries (Burkina Faso, Egypt, Ethiopia, Gabon, Ghana, Kenya, Lesotho, Mali, Mozambique, Senegal, South Africa, Tanzania, Uganda, and Zambia) have already conducted at least one innovation survey.

Innovation surveys collect qualitative and quantitative data on innovation activities and the successful introduction of different forms of innovation by firms in a certain country. How much these surveys can actually capture innovation in different countries depends on how the questionnaire is written and tailored to different country contexts. So, whilst redefining innovation in the context of developing countries is necessary and important in order to really capture the novelties introduced on the market, we still have to keep in mind that when South Korea and Taiwan were rising as global powers, this was very well reflected in their R&D statistics.. 

To many, talking about innovation in a continent where 38% of the adult population is illiterate and only 42% of the population has access to electricity makes little sense, or is at best wishful thinking. There is a growing community, however, that thinks that African countries need innovation.

The Globelics community, who held its annual conference in Addis Ababa in late October, is one of them.

With an average annual growth rate of 11%, Ethiopia is among the fastest growing countries in the world. In the last decade, poverty reduced and access to education improved in an unprecedented way. Structural change occurred but mainly benefited services and construction, while labour intensive manufacturing represents a minor share of value added and employment. The government has recently set an ambitious Science Technology and Innovation plan. Among the other results of this plan, public research institutes, science and engineering universities, and the National Science and Technology Research Council have been established. This is an example of the prominence of innovation in development countries’ policies agenda.

So, will Ethiopia go to Mars any time soon? The answer is probably not, even if history has shown that we should be prepared for miracles. However, innovation does not occur only in aerospace or other high-tech industries, but also in lower-tech industries. And not all innovations are technological innovations; organisational, process, and social innovations are also profitable, make innovators successful in their markets, and so affect economic growth, employment, and living conditions.

Hence, the question is not whether we should talk about innovation in developing countries, but rather what types of innovation occur in developing countries, how different types of innovation contribute to economic growth and socio-economic development, and what policies can stimulate innovation in developing countries. 

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The views here are that of the author and not necessarily that of ECDPM