Los días 13 y 14 de marzo de 2014, la Fundación Ramón Areces organizó con el Instituto de Estudios de la Innovación (IREIN) y el Foro de Empresas Innovadoras una jornada sobre 'Nuevos enfoques sobre políticas de innovación'. Contó con la intervención de destacados expertos internacionales como Luc Soete, rector de la Universidad de Maastricht; Julia Lane, del American Institutes for Research (AIR) de Estados Unidos; Giovanni Dosi, del Institute of Economics de la Scuola Superiore Sant'Anna (Italia); Daniele Archibugi, del CNRS y del Birkbeck College de la University of London; John Cantwell, del Rutgers Business School de Rutgers University (Estados Unidos); Jorge Katz, de la Universidad de Chile; Tom Hockaday, del ISIS Innovation de la Universidad de Oxford (Reino Unido), y Johan Schot, del Science and Technology Policy Research de la University of Sussex (Reino Unido).

1. Luc Soete
From Emerging to Submerging Economies
New Policy Challenges for Research and Innovation
International Seminar: “The New Agenda for Innovation Studies and Policy Implications”,
IREIN, Madrid, March 14th 2014.

2. Luc Soete – Universiteit Maastricht 2
Outline
• Start from a debate on March 4th with EC Commissioners Olli
Rehn and Maire Geoghan-Quinn on conditions for growth.
• Follow-up from recent ERIAB Stress Test: “Placing excellence
at the centre of research and innovation policy” presented at
Innovation Convention earlier this week in Brussels.
• Divergence between international shifts in location of high-tech
production and the value changes involved (see e.g. recent
OECD study Interconnected Economies: benefiting from global
value chains, 2013) and link with innovation versus
international shifts in science.
• What are the policy implications of this divergence? And in
particular what are the potential opportunities for new policy?

3. Luc Soete – Universiteit Maastricht 3
1. Investing in research and innovation
• Recognition of the long term importance of science, research
and innovation is not an issue of debate in emerging countries
where additional knowledge is considered these days as
complementary to economic growth and structural change.
• Paradox is that in developed, knowledge based economies
doubts are raised about the value of science and research. Yet,
thanks to science and research our life expectancy has risen
dramatically, there is more well-being than ever before, and
we have more opportunities in life than previous generations.
• Discussion focuses on short vs long term: question in how far
short term models as used by policy makers and economists in
macro-economic similations, do contain in phases of “fiscal
consolidation” an intrinsic bias against long term growth...
• Central role of public investment.

4. Luc Soete – Universiteit Maastricht 4
-80
-70
-60
-50
-40
-30
-20
-10
0
10
20
30
40
Public gross fixed capital formation
(growth rates in volumes: 2009-2013)

5. Luc Soete – Universiteit Maastricht 5

6. Luc Soete – Universiteit Maastricht 6
Public prioritisation of R&D
(GBAORD as % of total government expenditures)
1.20
1.70
2.20
2.70
3.20
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
EU-15
Germany
France
Austria
Korea
Netherlands
United States

7. Luc Soete – Universiteit Maastricht 7
Scenarios for R&I policies in 2014-2020
Scenarios Countries
“Modus operandi” Czech
Republic, Hungary, Lithuania, Malta, Poland, Slov
akia
“Empty pocket” Bulgaria, Cyprus, Greece, Italy, Latvia, Portugal,
Romania, Slovenia, Spain
Long-term commitment
to R&I policies
Past commitment based
on regional identity
Austria, Denmark, Estonia, Finland, France, Germ
any, Ireland, Luxemburg, Netherlands, Norway, S
weden, Switzerland, UK
Belgium (Flanders)

8. Luc Soete – Universiteit Maastricht 8
Impacts of funding cuts: questions
• MS under the strongest budgetary pressures appear to have
„consolidated‟ their public spending most in areas where cuts in public
spending raised the least immediate opposition but affected growth
primarily in the long term.
• Raises the methodological question: to what extent do short term
macro-economic models used for simulating MS‟ fiscal needs contain
an intrinsic bias against long term growth policy priorities (see e.g.
the Dutch KNAW study)?
• What is the purpose and effectiveness of small countries (the
majority of EU MS) investing in research as opposed to innovation?
• Has the continuous public support for R&I in countries with a pre-
crisis priority given to R&I (Austria, Denmark, Estonia, Finland,
Germany, Norway, Sweden, Switzerland) been a factor behind the
stronger resilience of those economies, while providing them at the
same time also with a less stringent fiscal consolidation framework?

9. Luc Soete – Universiteit Maastricht 9
2. An EU emerging knowledge divide?
• The euro-crisis has brought about a research and innovation divide
within the EU likely to perpetuate itself.
• We witness the emergence within the EU of “submerging” economies
(Paul Collier) with the crisis affecting their long term capacity to
invest in human resources and R&I and as a result a brain drain of
their most talented youngsters to the rest of Europe or abroad.
• Possible appearance of a knowledge divide “hysterisis effect”: while
the current generation in “submerging“ economies appears more
educated than the previous one, the lack of employment
opportunities leads to rapid evaporation of this human capital.
Combined with a structural declining trend in labour force
participation because of ageing of the population, the high
unemployment and low participation rate of youngsters is negatively
affecting long-term productivity growth in those countries.

10. Luc Soete – Universiteit Maastricht 10
Common Smart Specialization
Strategies?
• Officially the heterogeneity of Europe‟s regions requires more
place-based smart specialization strategies (S3) tailored for
regions that reflect their absorptive capacity and regional
characteristics.
• Less research-intensive regions should enhance the innovation
capacity of domestic firms with a focus on the promotion of
growth and new jobs.
• Prioritised investment in education and training to deliver
social inclusion and an absorptive capacity for innovation
outputs is essential to underpin measures to stimulate
Research and Development and innovation investments in all
types of regions but even more so in regions in receipt of ESIF
• Central role of regional policies: but are they well equipped?

11. Luc Soete – Universiteit Maastricht 11
SSS and globalisation of innovation
• Long tradition on economic research on impact of
internationalisation in production.
• Today focus on global value chains: example of iPad but quid
about the evidence at the more aggregate level about
industries and countries?
• New trends: re-shoring? Using new technological
developments such as 3-D printing? Starts again from practical
product examples towards broader industry/country analyses.
• Opportunity for regional innovation policy? Local anchorage of
creativity and innovation; possibly also with respect to
servicing, but quid about production?
• Link with smart specialisation debate.

12. Luc Soete – Universiteit Maastricht 12

13. Luc Soete – Universiteit Maastricht 13
Country value distribution of an iPad
Source: Kraemer, Linden en Dedrick, 2011)

14. Luc Soete – Universiteit Maastricht 14
The smiling curve of the value chain

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3. Policy challenges and inconsistencies
• Growing inconsistencies between MS‟ and European research
(ERA), innovation (IU) and social cohesion (ESIF) support
policies:
– EU programs are viewed by MS as fiscal “relief” for national
R&I budget rather than the result of “joint programming”
initiatives
– Creating national/regional value out of grand challenges or
how to link local “smart specialisation” with global grand
challenges?
– Focus on “beggar-thy-neighbour” (e.g. R&D tax credits?)
rather than on “smart” national/regional R&I policies.

16. Luc Soete – Universiteit Maastricht 16
Direct funding of business R&D and R&D tax
incentives, 2010 (As a percentage of GDP, 2011)
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
% Direct government funding of BERD Indirect government support through R&D tax incentives Data on tax incentive support not available

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“Good science anywhere is good for
science everywhere“ (Subra Suresh)
• Long term global challenges to European nationally organized science
and research. The emergence of e-science (David Osimo):
– New scientific outputs and players: nanopublications, data
and code; vertical disintegration of the value chain
– Greater role for inductive methods: everything becomes a
Genome Project
– Scaling serendipity: Big linked data, collaborative annotation,
social networking and knowledge mining detect unexpected
correlations on a massive scale
– Better science: reproducible and truly falsifiable research
findings; earlier uncovering of mistakes
– More productive science: reusing data and products,
crowdsourcing work, reduce time-to-publication

18. Luc Soete – Universiteit Maastricht 18
Global Research Policy Challenges
• Shift from national focus of “national” research councils such as FWO,
NWO, ERC, NSF, NISTEP, STEPI, Chinese Academy of S&T towards a
more Global Research Council structure?
• How to sell to “national” policy makers in periods of fiscal
“consolidation” that the heavily biased “long tail” output distribution
of inventions with hundred years‟ rate of return could be drastically
brought back (see Bill Press keynote at 2013 AAAS meeting)?
• Global policy coordination migth be essential: Science 2.0 as MOOR
(Massive Online Open Research) and Smart Science Specialisation?
• Not all research data is the same but interoperability of data is more
hampered by different “quality notions” of data across disciplines than
accross countries;
• Global crowd-funding as a new social capital in support of collective
intelligence?

19. Luc Soete – Universiteit Maastricht 19
Conclusions
• Today, we have in Europe a strong European commitment to both research
and innovation with the new Horizon 2020 programme illustrating the EC‟s
strong commitment to its own pattern of smart fiscal consolidation (within a
declining overall budget, expenditures for research and innovation increased
from 50 to 72 billion euros);
• And a diverging pattern in the public priority given to research in individual
MS. Time hence for some more radical reflections on moving from the old
“open” to more “strict methods of coordination” of “joint programming” of
research.
• By contrast, in the area of European “social cohesion” policies aimed at
achieving standard of living convergence, the EU is confronted for the first
time with knowledge divergence. While the fact that the advantages accruing
to certain MS (and regions) could be considered as an illustration of intra-
European solidarity based, as in the case of development cooperation, their
lack of effectiveness calls for more “open” differentiated regional strategies
addressing policies as integral part of a new long term growth strategy.

20. Luc Soete – Universiteit Maastricht 20
Thank you for your attention!