Thinking about innovation and technology have evolved within international development. The developing world tends to be characterized by their absence, while the success of developed countries is popularly attributed to their technological prowess.  Innovation is seen as an unaffordable luxury for some countries and an indispensable strategy for others.

Innovation is encouraged by incentives within the economy, and is moving from funding inputs to rewarding outcomes.

Following World War II, many newly independent developing countries attempted to reduce their reliance on outside production and jump start their own process of technological progress.  In contrast, later decades saw cuts to higher education and research in developing countries under structural adjustment.  Ironically, the response of OECD countries to the recession was to increase investment in innovation and technology, seen as vital to their own future development. This duality is now breaking down as parts of the developing world contribute a rising share of global research, and many more have inserted themselves into global value chains.  At the same time, constraints on foreign aid budgets have heightened demand for evidence of “what works” in development and inspired interest in new ways of encouraging innovation.

 

Endogenous growth, exogenous agendas

Previous generations of thinkers explained economic growth as accumulation of capital, land, and labor.  Yet some growth stems from improvements in how such factors are converted into production through improvements in technology or organization (Helpman 2004).  With the realization that part of economic growth lay in such advances, there was increasing attention to the role of scientific progress and new technologies in enabling growth.  Investments in innovation and technology respond to perceived profit opportunities.  Firms that produce new products or use new processes can earn profits over and above the costs of production.  To remain competitive, other firms are forced to learn and adapt these improvements within their own operations.  When they do, a new equilibrium is realized, ending the period of monopoly rents for the leading firm (Grossman and Helpman 1991).  Investments in innovation and technology vary between industries.  Some firms must invest in new designs to get the next generation of products to the market, as there is little demand for old products.  For example, tablet computers have reduced the demand for scientific calculators, which earlier displaced slide rulers.  Firms engaged in aerospace, pharmaceuticals, and information technology must keep up with their competitors.  Yet the pressure is somewhat less intense for firms engaged in forestry, health care, or food services.

Knowledge is also a public good.  Some benefits accrue, not to the firms that underwrite research, but to others that copy or use the knowledge derived from it (Helpman 2004).  Firms have an incentive to invest in near-market research, yet little incentive to invest in research that cannot be easily captured or utilized.  Thus the state has a role to play correcting market failure, funding research that is valuable to the economy and society, but for which the market does not provide an incentive. This explains why historically the state has been a strong supporter of research.  In the United States, late 20th century narratives used to justify research funding were based on winning battles against communism and specific diseases.  At the same time, influence shifted into the realm of business and public policy, accompanied by changes in policy instruments and institutional arrangements used to fund innovation and technology.  Although the research granting councils continue to respond to curiosity-driven research, much of global science funding is directed through mission-oriented agencies, or more recently “grand challenge” programs.

 

From funding inputs, to rewarding outcomes

Firms and governments the world over seek to better understand the “value” or benefit created from funding for innovation and technology.  A new governance has emerged that is characterized by market-oriented funding and goals negotiated among policy-makers, stakeholders, and research “consumers.”  Whitley and Gläser (2007) note that OECD countries increased ex-post evaluation of how funded research contributes to strategic objectives.  Funders must demonstrate the value of their work, not only in terms of scientific excellence in the eyes of peers, but in terms of its cost-effectiveness, as well as it utility, impact, and relevance to others.

Yet generic calls to demonstrate “value for money” gloss over potentially incommensurable ways of understanding the utility of innovation and technology. Research can be perceived as a production process and assessed according to the quantity and quality of its outputs.  Yet society is arguably more concerned about getting a cure for cancer than having a large number of articles written about it.  It is notoriously difficult to demonstrate a return on investment when dealing with complex problems.  There is not a simple linear pathway from spending to outcome for many development challenges, such as reducing hunger or improving public health.  Instead, the pathways through which innovation and technology can affect change are varied and intricate.  What works in one context cannot necessarily be applied in another; for example technologies such as vaccination are less effective in resource-poor settings that lack electricity and refrigerators, or when people are simply unaware of the benefits or suspicious of the risks involved.

An impatience for “getting to scale” can miss critical barriers to adoption or opportunities for refinement. Those truly interested in the potential for technology to improve lives require a degree of humility, an acceptance of uncertainty, and willingness to learn from experimentation.

 

References

Grossman, G. M. and Helpman, E. (1991). Innovation and growth in the global economy. MIT Press.

Helpman, E. (2004). The mystery of economic growth. Harvard University Press.

Whitley, R. and Gläser, J. (2007). The changing governance of the sciences: the advent of research evaluation systems. Dordrecht, Netherlands: Springer.

 

 

— Study Guide Theme
Innovation and Technology
— Study Guide Chapter

Comments