Introductory presentation to Saint Lucia stakeholders for consultation on developing innovation strategy and action plan for National Trade Strategy on behalf of International Trade Centre (ITC)
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Innovation Policy Framework: St Lucia
1. Saint Lucia National Export Strategy Consultation
Innovation
20 November 2017
Subhrendu Chatterji
2. What is innovation?
2
Source: Oslo Manual: Guidelines for collecting and interpreting innovation data. Third edition.
OECD. 2005
An innovation is the implementation of a new or significantly improved product (good or
service), or process, a new marketing method, or a new organisational method in business
practices, workplace organisation or external relations.
A product innovation is the introduction of a good or service that is new or significantly improved
with respect to its characteristics or intended uses. This includes significant improvements in
technical specifications, components and materials, incorporated software, user friendliness or
other functional characteristics.
A process innovation is the implementation of a new or significantly improved production or
delivery method. This includes significant changes in techniques, equipment and/or software.
A marketing innovation is the implementation of a new marketing method involving significant
changes in product design or packaging, product placement, product promotion or pricing.
An organisational innovation is the implementation of a new organisational method in the firm’s
business practices, workplace organisation or external relations.
3. Traditionally innovation has been seen as a linear process…
3
INVENTION INNOVATION DIFFUSION
Basic Research
App. ResearchBasic Research
App. Research Development
Development
Invention/Patent
Commercialization
Market Launch Production
Prototype New product/
process
Commercialization
Source: Search and Innovate: A Way Towards Technological Change in Small Countries. Uquillas, Jorge; Sáenz-Arce, Pedro. IDB. 2005
4. …it is increasingly seen as more complex, systemic and
multi-directional
4
FEEDBACK
RESEARCH
KNOWLEDGE
(both in-firm and available elsewhere)
Potential
Market
Invent and/or
produce
analytic
design
Detailed
design
and test
Redesign
and
Produce
Distribute
and
Market
KNOWLEDGE
(both in-firm and available elsewhere)
Source: Search and Innovate: A Way Towards Technological Change in Small Countries. Uquillas, Jorge; Sáenz-Arce, Pedro. IDB. 2005
5. Education and skills.
Technology research
and commercialization
infrastructure.
Digital technology
infrastructure and
ecosystem.
Innovation policy needs to address needs at different levels
5
Business
Environment
Finance, strategies
and institutions
Technology policy
environment
Supportive key building
blocks of innovation
Regulatory
environment
Innovation enabling
framework for
organizations
Vibrant capital
markets.
Churn and change
accepted, embraced.
High level of
entrepreneurship.
Cooperation and
collaboration part of
culture.
Strong ICT adoption,
especially among
business.
Strong managerial
skills.
Pro-innovation tax system.
Competitive and open trade regime.
Ease of starting business.
Transparency and rule of law.
Support for competitive product and labour markets.
Limited regulations on the digital economy.
Government procurements based on performance
standards.
The Good, The Bad and The Ugly (and The
Self-Destructive) of Innovation Policy: A
Policymaker’s Guide to Crafting Effective
Innovation Policy. Stephen J. Ezell and
Robert D. Atkinson. 2010
6. Policies to strengthen innovation are typically based on key
pillars
6
Skilled workforce
Supportive business environment
Strong and efficient system for knowledge creation and diffusion
Policies to encourage firms to engage in innovation and entrepreneurial activities
7. …and it translates into a range of policy options
7
Source: The New Imperative of Innovation Policy: Perspectives for Latin America and the
Caribbean. Juan Carlos Navarro, José Miguel Benavente, and Gustavo Crespi. IDB. 2016.
Horizontal Vertical
PublicGood
Higher education and training
Support of scientific research
Intellectual property rights
Research infrastructure
Human capital/immigration
Labour training
Regulation/Competition policy
Technology transfer organization
Entrepreneurship education
IP rights and bankruptcy legislation
Innovation climate
Improve deal flow through technology transfer
Tax policy
Technological institutes (e.g., agriculture,
industry, energy, and fishing)
Standardization
Thematic funding
Signalling strategies
Information diffusion policies (extension
systems)
Technological consortiums
Contests
Industry-specific training
programs
Market
Intervention
R&D subsidies
R&D tax credits
Financial measures (e.g., guarantees for
technology investments and intangibles values)
Adoption subsidies
Public financing of seed, angel, and venture
capital, directly or through private VC funds
Generic business incubators and accelerators
Tax incentives
Public procurement
General purpose technologies (e.g., ICTs,
biotech, and nanotech)
Strategic sectors (e.g., semiconductors,
nuclear energy, and electronics)
Defence sector
Business incubators and accelerators
focused on particular strategic sectors
(e.g., ICT or biotechnology)
TypeScope
8. Overall STI policy focus in larger countries is on business
innovation and skills
8
Sources: OECD Science, Technology and Innovation outlook 2016. OECD. 2016
0
5
10
15
20
25
30
Structuraladjustment
Societalchallenges
Sustainable/greengrowth
Globalisationandinternational
cooperation
Overall-GovernanceofSTIpolicy
Designandimplementation
Coordinationandparticipation
Evaluation
Frameworkconditions
Overall-Publicresearchsystem
Researchinfrastructures
Publicresearchreform
Impactofscience
Overall-Businessinnovation
Innovationinfirms
EntrepreneurshipandSMEs
Policymix
Targetingpriorityareas
Overall-Humanresourcesandskills
Innovationculture
Educationandtraining
ResearchandS&Tcareers
Challenges . Governance . Public research Innovation in firms and entrepreneurship Skills for innovation
High and increasing High and unchanged Medium and increasing Medium and unchanged Medium and decreasing Low and increasing Low and unchanged
9. 0
20
40
60
80
100
Competitive
grants
Debt financing Equity financing Technology
consulting and
extension
programmes
Repayable
advances
Tax incentives
for R&D
Public
procurement for
innovation
Other tax
incentives
Innovation
vouchers
Tax incentives
on IP gains
%
Increasing relative relevance Unchanged relative relevance Decreasing relative relevance
Direct financing of innovation is emphasized and is increasing
in relevance
9
Sources: OECD Science, Technology and Innovation outlook 2016. OECD. 2016
0
20
40
60
80
100
Competitive
grants
Debt financing Equity financing Technology
consulting and
extension
programmes
Repayable
advances
Tax incentives
for R&D
Public
procurement for
innovation
Other tax
incentives
Innovation
vouchers
Tax incentives
on IP gains
%
In use Not in use
10. Countries’ innovation capabilities develop over time
10
Source: The Innovation Paradox: Developing-Country Capabilities and the
Unrealized Promise of Technological Catch-Up. Xavier Cirera and William F.
Maloney. World Bank Group. 2017
Production
capabilities
Technological
adaptation capabilities
Invention
capabilities
The capabilities escalator
Level of development
11. The focus of innovation policy should depend on the stage of
the country’s development
11
Source: The Innovation Paradox: Developing-Country Capabilities and the
Unrealized Promise of Technological Catch-Up. Xavier Cirera and William F.
Maloney. World Bank Group. 2017
Long-term R&D and
technological programs
Minimize innovation gap
between leaders and
laggards
Collaborative innovation
projects
Building technological capabilities
Incentivize R&D projects
Link industry and academia
Improving quality of research,
innovation and export
infrastructure
Building managerial and organizational capabilities
Start collaborative projects
Need to develop STEM skills and engineering
Need for basic infrastructure—NQI and Incubation
Elimination of barriers to physical, human and knowledge capital
STAGE 2
Maturing NIS
STAGE 3
Mature NIS
STAGE 1
Incipient NIS
Levelofdevelopment
12. LAC countries need significant strengthening of their
innovation performance
12
State of the art in generation
of new knowledge
Frontier basic and applied R&D
New products & processes
on a global scale
Adaptive engineering
Major improvements in
products & processes
Minor improvements in
products & processes
Routine factory operation
Typeofinnovation
Innovationgap
Technological
capacity in
LAC
Source: National Science, Technology and Innovation Systems in Latin America and the Caribbean Science Policy Studies
and Documents in LAC, Vol. 1. Guillermo A. Lemarchand (ed). UNESCO. 2010
13. Main policy choices for innovation tools
13
Horizontal vs vertical
Sector- and technology targeted vs generic
Financial vs non-financial
Competitive vs non-competitive
Supply-side vs demand-side
Short vs medium/long-term horizon
For MICs such as St. Lucia
Diversifying continuously into higher value-added activities
Innovating through the adoption of existing knowledge elsewhere in the world and
increasingly through the development of local technological capabilities
Regionalization
Reforming product, labour and financial markets as well as skills development schemes
Fostering competitive and innovative service sectors
Focusing on sectors with export potential
Source: OECD, author
14. Effective policy implementation needs a National Innovation
System
14
“ .. the network of institutions in the public and private sectors whose activities and
interactions initiate, import, modify and diffuse new technologies.” (Freeman, 1987)
“ .. the elements and relationships which interact in the production, diffusion and use of
new, and economically useful, knowledge ... and are either located within or rooted inside
the borders of a nation state.” (Lundvall, 1992)
“... a set of institutions whose interactions determine the innovative performance ... of
national firms.” (Nelson, 1993)
Definitions
Key ingredients
Innovative firms with necessary scientific and technological capabilities, access to
funding and a willingness to take risk.
Effective supporting institutions.
Supportive science and technology policies.
Wider framework of enabling conditions.
Sources: Search and Innovate: A Way Towards Technological Change in Small Countries.
Uquillas, Jorge; Sáenz-Arce, Pedro. IDB. 2005
National Innovation Systems. OECD
Often combined with science and technology policy/systems (STI)
15. 15
Provision of knowledge inputs to the innovation process
Provision of R&D
Competence building
Demand-side activities
Formation of new product markets
Articulation of quality requirements
Provision of constituents of SI
Creating and changing organizations needed for developing new fields of innovation.
Networking through markets and other mechanisms
Creating and changing institutions
Support services for innovating firms
Incubation activities
Financing of innovation processes and other activities
Provision of consultancy services relevant for innovation processes
Small Country Innovation Systems: Globalization, Change and Policy in Asia and Europe. Ed.
Charles Edquist and Leif Hommen. Edward Elgar. 2008
A NIS provides a range of services and support through the
policy tools
16. A NIS requires coordinated action from a range of entities
Framework conditions
Financial environment; taxation and
incentives; propensity to innovation
and entrepreneurship; mobility
Demand for innovation
Consumers, Government (final demand)
Producers (intermediate demand)
Education &
research
Industrial system
Large companies
Mature SMEs
New, tech-based
firms
Intermediaries
Research institutions
Technology transfer
support organisations
Technology services
providers
TVET
Higher ed. &
research
Public research
Political
system
Govern-
ment
Gover-
nance
STI
policies
Infrastructure
Finance
Intellectual Property
Regime (IPR)
Innovation &
business support
Standards & norms
Source: Kuhlmann and Arnold, 2001
17. The Global Innovation Index is an internationally recognized
benchmark for a country’s innovative capacity
17
Source: www.globalinnovationindex.org
Institutions
Political
environment
Regulatory
environment
Business
environment
Human
capital and
Research
Education
Tertiary
education
Research &
development
Infrastructure
ICTs
General
infrastructure
Ecological
sustainability
Market
sophistication
Credit
Investment
Trade,
competition,
& market scale
Business
sophistication
Knowledge
workers
Innovation
linkages
Knowledge
absorption
Creative
outputs
Intangible
assets
Creative goods
and services
Online
creativity
Knowledge &
technology
outputs
Knowledge
creation
Knowledge
impact
Knowledge
diffusion
Global Innovation Index
(average)
Innovation Efficiency Ratio
(ratio)
Innovation Input
Sub-Index
Innovation Output
Sub-Index
18. Caribbean economies surveyed score high on GII institutional
support criteria, but are particularly weak on knowledge and
technology outputs
18
0
20
40
60
80
100
Institutions
Human capital and
research
Infrastructure
Market
sophistication
Business
sophistication
Knowledge and
technology outputs
Creative outputs
Dominican Rep Jamaica Mauritius Switzerland T&T
Source: www.globalinnovationindex.org. 2017 GII Indicators
20. 20
Service-sector innovation derives less from investments in formal R&D.
More reliance on acquisition of knowledge/IP from outside sources through acquisition and
collaboration.
Human resource development is especially important to service firms.
Indications that a lack of highly skilled personnel is a major impediment to service innovation
in most OECD economies.
The role of newly established firms in innovative activity is greater
Entrepreneurship is a key driver of service innovation (but small firms tend to be less
innovative than larger firms).
IPR protection is more important, especially on software and business method
patents.
Changes in policy regimes governing software-related patents and business method patents
would impact service-sector firms, regardless of their main activities.
Source: Promoting Innovation in Services. Working Party on Innovation and Technology Policy. OECD. 2005
There are important differences between innovation in
services and manufacturing
21. Mauritius NES: Constraints in export innovation
Policy and regulatory issues
Lack of a coherent approach to promote innovation in the export sector
Limited investment in R&D relevant for priority export sectors
Limited number and scale of policy instruments used to promote innovation
Supply-side issues (service providers’ side)
Shortage and mismatch of skilled labour force
Deficient provision of relevant and sustained technological support
University’s contribution to an innovative productive sector is limited
Inadequate technological and innovation infrastructure
Demand-side issues (private sector)
Lack of critical mass in innovative segments
Smaller firms are not adopting existing technologies
Insufficient appetite for innovation
Lack of offer of innovative products
21
23. Subhrendu Chatterji Consulting Base Innovation policy framework Caribbean Saint Lucia St Lucia ITC International Trade Centre 23
Historically, St. Lucian firms have made limited innovations
Indicator
St.
Lucia
LAC
All
Countries
Percent of manufacturing firms using technology licensed
from foreign companies
0 14.2 14.5
Percent of firms having their own Web site 15.4 43.5 44.1
Percent of firms using e-mail to interact with clients/suppliers 53.9 79.6 71.4
Percent of firms that introduced a new product/service 14.1 46.0 36.8
Percent of firms whose new product/service is also new to the
main market
0 53.3 65.1
Percent of firms that introduced a process innovation 1.4 32.0 34.0
Percent of firms that spend on R&D 9.9 23.3 16.6
Source: http://www.enterprisesurveys.org/data/exploreeconomies/2010/st-lucia#innovation-and-technology
2011 information. 150 firms. 63 manufacturing, 87 services. 79 small (5-19), 55 medium (20-99) and 16
large (100+)
24. Subhrendu Chatterji Consulting Base Innovation policy framework Caribbean Saint Lucia St Lucia ITC International Trade Centre
Innovation-related data from PROTEqIN survey….
24
Source:
Technical Note: Productivity, Technology and
Innovation in the Caribbean 2014 Survey and
Latin American Country Enterprise Survey 2011
Survey Description & Technical Report.
Compete Caribbean. 2014
LACES 2011 sample
PROTEqIN 2014 sample
25. Subhrendu Chatterji Consulting Base Innovation policy framework Caribbean Saint Lucia St Lucia ITC International Trade Centre
St Lucia ranks around the middle of Caribbean
innovative activities……
25
26. Subhrendu Chatterji Consulting Base Innovation policy framework Caribbean Saint Lucia St Lucia ITC International Trade Centre
Most innovation is undertaken in partnership with
specialized institutions
26
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There is some patenting activity….
27
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Most filing is done for patents owned by others
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Some resources are allocated to innovation activities….
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30. Subhrendu Chatterji Consulting Base Innovation policy framework Caribbean Saint Lucia St Lucia ITC International Trade Centre
Most innovation is funded from partners’ and own
resources
30
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There is good awareness of innovation TA programs
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There is interest in receiving support in innovation….
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…but firms are generally unwilling to contribute
33
v
v
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Firms have mixed views about preferred source of TA
34
35. Subhrendu Chatterji Consulting Base Innovation policy framework Caribbean Saint Lucia St Lucia ITC International Trade Centre
Around 50% of firms plan to innovate over next two
years
35
36. Subhrendu Chatterji Consulting Base Innovation policy framework Caribbean Saint Lucia St Lucia ITC International Trade Centre
Examples of regional innovation initiatives
36
Source: http://www.infodev.org/EPIC
Accelerate Caribbean: Builds capacity of regional business enablers through mentorship,
training programs, and international study tours.
Access to Finance: Promotes angel investing and innovative financing in the region through
LINK-Caribbean and contributed to the launch of Jamaica's first angel network.
Caribbean Climate Innovation Center: Connects climate technology entrepreneurs with
knowledge, markets, and funding.
Caribbean Mobile Innovation Project: Led by PitchIT Caribbean, promotes growth of
mobile app businesses through innovation hubs and pitching competitions.
Women Innovators Network in the Caribbean: Supports women entrepreneurs through
webinars and training programs, including the WINC Acceleration Program.
Entrepreneurship Program for Innovation in the Caribbean (EPIC) seeks to build a
supportive ecosystem for high-growth and sustainable enterprises throughout the
Caribbean. The seven-year $20 million program is funded by the government of Canada
and implemented by infoDev and the World Bank Group.
37. Subhrendu Chatterji Consulting Base Innovation policy framework Caribbean Saint Lucia St Lucia ITC International Trade Centre
Compete Caribbean
37
Source: http://competecaribbean.org/
Pillar 1: Productivity & Innovation in Private Sector Firms
TA for projects that strengthen the productivity and competitiveness of Caribbean businesses,
products and services on the regional and global markets. Four thematic areas:
Cluster Operations: to overcome barriers related to economies of scale and competitiveness.
Innovations Funds: initiatives aimed at resolving low productivity.
Technology Extension Services: TA to improve business management processes and
production processes.
Entrepreneurship: TA to institutions that provide entrepreneurial support.
Compete Caribbean Partnership Facility (CCPF): PSD program to deliver innovative
and practical solutions to stimulate economic growth, increase productivity and foster
innovation and competitiveness. Projects executed in 13 countries across the Caribbean
region. Jointly funded by IDB, the UK DFID and CDB.
38. Subhrendu Chatterji Consulting Base Innovation policy framework Caribbean Saint Lucia St Lucia ITC International Trade Centre
Compete Caribbean, contd.
38
Pillar 2: Enhancing the Business and Innovation Climate
To enhance the legal, institutional and regulatory framework for business and innovation.
Studies aimed at identifying constraints to competitiveness, productivity, innovation and job
creation at the national or sector level.
Reforms aimed at improving the World Bank’s Ease of Doing Business Index ranking
including support for the drafting of policies; legislation and regulations; and establishing and
strengthening institutional frameworks.
Sector level reforms (e.g., sector level policy, legislation, and regulations; formation or
strengthening of sector/industry association; operating standards; workforce development; etc.)
Capacity assessment of the institutional framework for promoting private sector development,
competitiveness, productivity and innovation.
Establishing and/or strengthening national institutions that promote private sector
development, competitiveness, productivity and innovation.
Expert advice for the implementation of business and innovation climate polices, reforms or
enhancements and advice for establishing and maintaining public-private dialogue and PSD.
Source: http://competecaribbean.org/
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Examples of regional innovation support programs,
contd….
39
