National innovation systems concept as a policy tool in refining catching-up strategies in small developing countries

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National innovation systems concept as a policy
tool in refining catching-up strategies in small
developing countries

• MAREK.TIITS_at_IBS.EE

Photo Johannes Pääsuke 1912Estonian National
Museum
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Recent policy work in Estonia

• Competitiveness and future outlooks of the
  Estonian Economy, Estonian RD Council, 2003
• Made in Estonia, forthcoming 2005
• Theoretical framework
• ICT, bio- and nanotechnology trends 2015
• Estonian main socio-economic challenges
• Policy scenarios

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What policies should a small country pursue?

• Antonio Serra, Breve trattato delle cause che
  possono far abbondare li regni doro e argento
  dove non sono miniere A brief overview of
  reasons that may bring a lot of gold and silver
  to kingdoms where there are no mines, Naples,
  Lazzaro Scoriggio, 1613. (See also Reinert 1994,
  Freeman 1998)

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Globalisation EU enlargement

• Larger market enables for greater division of
  labour (Smith 1776)
• application of new (in local context)
  technologies for increasing productivity
• new markets for capital goods (technology)

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All economic activities are not the same

• Charles King (1721)
• good trade and bad trade
• Creative destruction and economic cycles
• Kondratjev 1926, Schumpeter, Freeman et. Al

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From business cycles to long waves of development
Source Perez (2002)
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Global spread of technologies
as they matured in mass production paradigm
Increasing returns
Decreasing returns
Source Wells (1972)
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Catching up or lagging behind?
Quality of industrial change in selected World
regions, 1980-2000
Source Reinert and Kattel 2004
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Real GDP per capita
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Small/developing country squeeze

• Global technological development largely
  exogenous to domestic RD efforts
• Domestic (tiny) public investment into RD
  generally not a feasible way to acquire presence
  in radically new indigenous high-tech industries
• Increasing cost competition in resource and/or
  labour intensive low-tech sectors
• Avoid social dumping and race to the bottom

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Policy strategies
Fast follower
Technology diversification
Technology leader
Cost leader
Source Wells (1972)
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Locational windows of opportunities

• Attracting certain parts of the value chains of
  new high-tech industries, i.e. ICT, bio- and
  nanotechnologies
• while ensuring positive spillovers from FDI and
  upgrading the existing traditional activities

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Lessons for future

• Emphasis on structural adjustment and horisontal
  policy co-ordination
• strong insight on the development of global
  markets and new technologies
• future education and technology needs (inward
  technology transfer and RD are both important)
• life-long learning and active labour market
  policies
• targeting of specific FDI and ensuring spillovers
  / technology transfer to indigenous companies