Does Innovation and Technology Policy Pay-off? Evidence from Turkey

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• Does Innovation and Technology Policy Pay-off?
  Evidence from Turkey
• Erol Taymaz
• Department of Economics
• Middle East Technical University
• Ankara 06531 Turkey
• Knowledge Economy Forum VIII
• INSEAD, Fontainebleau, France ? April 28-May 1,
  2009

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Outline

• Background Turkish economy since 1980
• Innovation and technology policy in Turkey
• RD in Turkish manufacturing
• Effects of RD support programs
• Economic crisis in 2008
• Policy implications

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Relative GDP per capital
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Relative productivity (hour worked)
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Economic policies

• 1960-1980 Planned development
• Import substitution industrialization
• Indicative planning
• 1980-1993 Export-oriented growth
• Export boom, based on real devaluation, low
  wages, and export subsidies
• Trade liberalization
• 1993-2001 Boom-and-bust cycles
• 1994, 1999 and 2001 crises
• 2001-2008 Rapid growth

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Innovation and technology policy

• 1960-1980 Planned development
• 1960 State Planning Organization
• 1963 Scientific and Technical Research Council
  of Turkey
• 1980-1993 Export-oriented growth
• 1980 Turkish Science Policy 1983-2003
• 1989 Supreme Council for Science and Technology
• 1993-2001 Boom-and-bust cycles
• 1991-2006 Technology Development Project
  Industrial Technology Project
• 1993 Turkish Science and Technology Policy
  1993-2003
• 1996 Seventh 5-Year Development Plan (1996-2000)
• 2001-2009 Rapid growth in GDP and RD
• 2004 Vision 2023

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Milestones

• Policy commitment
• Supreme Council of Science and Technology
• Policy conception
• Establishing a well-functioning National System
  of Innovation
• Policy tools
• RD support programs
• TTGV, RD loans (1992)
• TUBITAK, RD grants (1995)

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Milestones

• Institutional setup
• Public RD institutions
• Universities
• Turkish Patent Institute
• Turkish Accreditation Agency
• National Metrology Institute
• Competition Authority
• Innovation Relay Centers
• Technoparks
• etc

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National system of innovation
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National system of innovation
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Policies in 1993-2008
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Effects of RD support programs

• Effects of RD support
• RD support
• ?
• More RD
• Additionality, competitive pressures
• Better RD
• ?
• Performance (productivity and growth)

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RD/GDP ratio
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Number of RD personnel
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RD expenditures by performer
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RD support
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Methodology

• Panel-data econometrics
• Sample selection models
• Propensity matching estimates
• Difference-in-difference estimators
• Taymaz, E. and Ucdogruk, Y. (2009), Overcoming
  the Double Hurdles to Investing in Technology
  RD Activities of Small Firms in Developing
  Countries, Small Business Economics
  (forthcoming).
• Ozcelik, E. and Taymaz, E. (2008), RD Support
  Programs in Developing Countries The Turkish
  Experience, Research Policy (37) 258-275.

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Data sources

• Annual Survey of Manufacturing Industries
• 10
• 1980-2001
• About 10,000 establishments each year
• RD Surveys
• All RD performers
• 1992-2005
• About 300 firms each year
• TTGV and TIDEB clients
• All TTGV and TIDEB clients
• 1992-2005

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Effects of RD support programs

• Large firms are more likely to conduct RD.
• Although SMEs are less likely to conduct RD, RD
  intensity is higher in small than large firms.
• Technology transfer is likely to be a
  complementary activity for in-house RD for large
  firms.

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Effects of RD support programs

• RD support has a strong effect in raising RD
  intensity of RD performers.
• The effect of RD support is even stronger for
  small firms.
• RD support has a positive impact on the
  employment of RD personnel (no wage effect).

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Effects of RD support programs

• When the market share of RD support recipients
  increase, other firms (competitors) tend to
  increase their RD intensity as well.
• RD performers are more productive.
• RD support has a positive impact on RD in
  Turkish manufacturing (more RD).
• RD support has a positive impact on the way
  firms conduct RD (better RD).

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Effects of RD support programs

• The case of Arçelik
• Leading consumer durables producer in Turkey
• Established in 1955
• Net sales in 2008 3,574 million
• Exports 50 of sales
• Number of employees in 2008 18,000
• Leading innovative company
• 101th firm in the world in patent applications
  (2007)
• Received 10 of all patents granted in Turkey
• Established its RD center in 1991
• Received RD loans from TTGV since 1992

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Strength and weaknesses

• Strengths
• Institutional setup
• Diverse set of RD supports
• Public RD and universities
• Weaknesses
• Lack of a long-term, coherent, systematic vision
• Lack of coordination between policy organizations
• Lack of policy learning
• Too much emphasis on supply-side policies
• No accumulation of technological capabilities

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Economic crises in Turkey
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Economic crises in Turkey
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Economic crises in Turkey
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Economic crisis in 2008

• Measures
• Reductions in tax rates (value added tax and
  special consumption tax motor vehicles)
• Reductions in labor cost (temporary work support,
  deductions in social security contributions)
• Incentives for clustering for textiles
• Short term employment in the public sector

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Policy conclusions

• Does Innovation and Technology Policy Pay-off?
• Could it be more effective?

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• Thanks for listening