Technology and Innovation Report 2015

Fostering Innovation Policies for Industrial Development

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This report focuses on how innovation policies can expressly promote industrial development, and what lessons can be learnt from existing experiences of countries, both developing and developed. It argues that while technology and innovation are an essential component of how industries use knowledge to apply to learning, their role in fostering economic development can only be harnessed if innovation policies are clearly and coherently linked to overall industrial development goals of countries. Basing its analysis on data as well as experiences of countries, the report argues for closer coordination between innovation policies and industrial goals in order to promote technology and innovation for overall economic development.



Linkages between innovation policies and industrial development

Interventions to support the growth of industry across sectors and promoting learning and innovation can be complex and take varied forms. The production of knowledge entails negative externalities due to its non-rivalrous and non-exclusive nature; this occurs as no individual or firm has the incentive to produce knowledge since it can be shared at marginal costs and is difficult to exclude. Market mechanisms, financial flows, transfer agreements, production processes all embody some level of negative externalities due to the complexities of trading information, or designing contracts with incomplete or asymmetric information. But at the same time, knowledge production and sharing also embody positive externalities that benefit society at large. Society benefits from the creation of new knowledge, and in addition, if collaboration within the private sector were to take place it would lead to a positive externality for learning and innovation for a large number of actors, which has added benefits for society over longer periods of time.


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