THE NEEDS FOR ADAPTIVE INNOVATION POLICY

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THE NEEDS FOR ADAPTIVE INNOVATION POLICY

• Under Free Market Complexity The Indonesian
  Experiences

By Erman Aminullah The Indonesian
Institute of Sciences (LIPI)
The Globelics Africa Conference, October 31th -
November 4th 2005 Pretoria, South Africa
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POINTS OF PRESENTATION

• INTRODUCTION
• POLICY MAKING UNDER COMPLEXITY
• INNOVATION POLICY UNDER FREE MARKET COMPLEXITY
• PAST EXPERIENCES AND FUTURE POLICY NEEDS

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Introduction

• The reality of policy matters
• 1. Complexity
• 2. Resistance
• Dealing with complexity resistance
• ? Policymaking process shift from rational to
  learning

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Introduction

• Current reality
• 1. Economic complexity
• 2. Some resistances toward free market
• Economic complexity policy resistance toward
  free market
• ? Needs of Learning to softening the
  pressure of free market
• ? Innovation and Technology Learning

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POLICYMAKING UNDER COMPLEXITY
Complex sistem behavior

• The emergence of unintended events and behaviors
  (butterfly effect)
• Because
• Complex system sensitivity against initial
  condition
• (the rule of initial condition)

Lorentz Curve
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Dealing with complexity
POLICYMAKING UNDER COMPLEXITY

• Seeing the elements as parts of the wholeness,
  containing
• -interconnection,
• -non-linearity,
• -uncertainty
• Like
• Seeing the trees viewing from the forest

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POLICYMAKING UNDER COMPLEXITY
THE WAYS OF THINKING (in solving a complex system)

• OUTPUT BOUNDED RATIONALITY
• PROCESS ORIENTED RATIONALITY

CREATING RATIONAL POLICY TO PERFORM
CREATING ANTISIPATIVE AND ADAPTIVE POLICY TO
EVOLVE

• UNDERSTANDING THE WHOLENESS BY LEARNING

PERFORMING CAN BE UNEVOLVING, BUT EVOLVING CAN
BE PERFORMING
?
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Input-output model
POLICYMAKING UNDER COMPLEXITY

• PRECISE CALCULATION Output processed from
  inputs
• because
• Process is perfect (black box)
• Environment is stable

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POLICYMAKING UNDER COMPLEXITY
RATIONAL POLICYMAKING (in Input-Output model)

• SUCCESS !
• Because..
• Process is perfect,
• Environment is stable, to
• - running the inputs
• - producing the output

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Information feedback model
POLICYMAKING UNDER COMPLEXITY

• HIGH STABILITY always seeking the reference
• Process like orchestra
• Autonomous control
• Correcting the discrepancy
• Seeking the reference

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POLICYMAKING UNDER COMPLEXITY
RATIONAL POLICYMAKING (in information feedback
model)

• SUCCESS !
• Because..
• Capacity to control the rhythms by design, to
• - producing the output
• - maintaining the reference

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Adaptive feedback model
POLICYMAKING UNDER COMPLEXITY

• CONTINOUS EVOLVING by anticipative and adaptive
  capability
• processlike surfing and herons flying
• responsive toward environment
• anticipative and adaptive toward environmental
  change

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ANTICIPATIVE POLICYMAKING (in adaptive feedback
model)
POLICYMAKING UNDER COMPLEXITY

• SUCCESS !
• Because.
• Capability gained by learning to surf at the edge
  of wave

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ADAPTIVE POLICYMAKING ( in adaptive feedback
model)
POLICYMAKING UNDER COMPLEXITY

• SUCCESS !
• Because..
• Capability gained by learning to mutually
  maintaining the direction, distance and speed
  without design

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INNOVATION POLICY UNDER FREE MARKET COMPLEXITY
Free market complexity

• EASINESS! to..
• Escalating the competition
• Degrading the resources
• Creating the self interest
• DIFFICULTIES ! To..
• Anticipating and adapting
• the pressure of disappointment of the common

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The pressures of disappointment of the common
INNOVATION POLICY UNDER FREE MARKET COMPLEXITY

• FIVE TYPES...
• Expectation differing from reality
• Disputes arising from unfair practices
• Acceleration creating deterioration
• Solution creating problems
• Resistance and delay

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The slowness of past recovery Indonesian
experience
INNOVATION POLICY UNDER FREE MARKET COMPLEXITY
The slowness of recovery can be arranged and
displayed systematically How to understand it 1.
What rules systemically underpinning the slowness
of recovery ? A systemic model 2. What basic
structure determining the strategic change ? A
point of leverage
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Systemic obstacles Indonesian experience
INNOVATION POLICY UNDER FREE MARKET COMPLEXITY
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Paradigm sift from mechanism toward organism
INNOVATION POLICY UNDER FREE MARKET COMPLEXITY
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Adaptive Innovation policy model (organic
perspective)
INNOVATION POLICY UNDER FREE MARKET COMPLEXITY
A simple rule in the model
Strong body with high calorie but lack of
nutrition, can be unhealthy (due to lack of
antibody)
Strong economy with high power of financing but
lack of technological innovation, can be
unhealthy economy (due to lack of competitiveness)
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Adaptive innovation policy model (Indonesian
case)
INNOVATION POLICY UNDER FREE MARKET COMPLEXITY
Increase in financing for innovation to
softening the competition pressure, and
cutting the protection
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Adaptive innovation policy (simulation results)
INNOVATION POLICY UNDER FREE MARKET COMPLEXITY
The point of leverage for strong and healthy
economy is
TECHNOLOGICAL INNOVATION
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PAST EXPERIENCES AND FUTURE POLICY NEEDS

• FIRST, innovation policy making in complex
  economic system needs an adaptive innovation
  policy model
• SECOND, dealing with complexity of free market
  competition needs an adaptive strategy to apply
  free market along with to salvage the domestic
  interest.
• THIRD, a possible future policy problem (in
  Indonesia) would be low domestic supply due to
  lack of competitiveness in the free market.
• POLICY NEEDS, innovation policy for equitable
  development, in addition to implementing
  growth policy by capital investment
• ? innovation policy instrument on HRD to create
  innovator in private sector, especially
  innovation-based SMEs.

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PHRASE(The nature is a wise teacher)
ONCE THE WAVE COMES, ONCE THE SAND
SHIFTS. (natural change, without destroying the
nature)
For the Sustainable future by equitable economic
development
THANK YOU