Talk given to the United Nations Summer Academy on the 2030 Sustainable Development Agenda. Focus is more on SDG 8 and 9.

1. Policies and structures that foster engagement,
innovation and entrepreneurship for sustainable
development
Professor Jenny Darroch; August, 2016

2. 2
Historical Context
UN Summer Academy on SDG

3. Historical Context
• Economic growth is due to
endogenous forces, not external
forces.
• Innovation economic growth
(P. Romer, 1990)
• Better human capital , more physical
capital economic growth
(Mankiw, D. Romer, Wiel, 1992)
• National Innovation Systems (Nelson,
Freeman, Lundvall, early 1990s).
UN Summer Academy on SDG 3

4. National Innovation Systems
Emphasis:
• Institutions - provide formal and
informal constraints
• Infrastructure and connectivity
• Macro-economy – is it stable, certain?
• $ invested into R&D, FDI inflows
• Number of STEM graduates
• Number of researchers
• OUTPUTS: patents and publications;
GDP growth/changing composition
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5. Over Time New Variables are Added (e.g., GCI)
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Theme Principle
Health Better physical, mental, social well being
leads to higher income
Product and service market efficiency • Need to allocate resources in best way.
• Competition good
Labor market efficiency Match workers to jobs so that their talent
is used to the fullest potential and then
grow the talent e.g., by training
Financial markets • Works efficiently,
• Access to money, including venture
capital
Market size Sum of domestic and foreign markets.
Larger markets – more willing to take risk
Finding good data is challenging

6. 6
Many Questions Have Been Tabled
UN Summer Academy on SDG

7. UN Summer Academy on SDG 7
Innovation
• Why is innovation so narrowly
defined?
• Do we count innovations by
measuring only patents and
publications?
• Do we assume that the only
innovation that matters needs R&D $,
STEM graduates, scientists?
• Current thinking: Move beyond
closed, internal, localized.
• Current thinking: Other types of of
innovation matter. Measure?
• Innovation vs. commercialization

8. Innovation
• Who should fund innovation –
government or private sector?
• Current thinking: government
• Current thinking: investment in
innovation should be global and
diversified – “innovation
diplomacy” [appendix]
UN Summer Academy on SDG 8

9. National Benchmarks Result in Averages
• Most studies create national
benchmark and then compare at
national level
• What about context?
• Current thinking: also examine
regional, local, sector,
technology/platform innovation
systems
UN Summer Academy on SDG 9

10. Economic Growth is Slowing
• Why has GDP growth
slowed?
• Education levels are
uniformly improving
• R&D investments have
continued (more or less)
• Productivity gains are
slowing
• What else should we
focus on?
UN Summer Academy on SDG 10

11. A Closer Look at Human Capital…People Matter
• With NIS, people were placed
“outside” the system
• Now people are “inside” the system
• People as “multipliers”
• How do we create an innovative
mindset? Celebrate innovation?
• How do we create an
entrepreneurial culture?
• Is all entrepreneurship “good”?
• Developed countries vs.
developing countries
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12. Knowledge Flows
• How do we get “actors” to
collaborate more?
• How do we encourage innovation
clusters and/or ecosystems?
• Should collaboration be national
and/or international?
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13. 13
Many Issues Still Require Attention
UN Summer Academy on SDG

14. Local Context Matters [Glo-cal]
• Don’t feel obliged to feed into a
globalized corporate innovation
network.
• Not all research requires large $,
STEM graduates, researchers
• Focus on innovations that provide
local solutions – e.g., to support
infrastructure development or
provide access to fresh drinking
water.
UN Summer Academy on SDG 14

15. Context Matters: Leverage Natural Capital
• Pay attention to your natural capital
as a starting position.
• Tradeoffs: economies with large
natural capital either:
• diversify into pharma, ICT
or
• specialize, be a niche player,
develop a small but
defendable position and
vertically integrate around this
UN Summer Academy on SDG 15

16. Innovation: Good and Bad
• Is all innovation good?
• Tradeoffs/questions:
• Sustainable growth vs.
productivity growth to grow
GDP
• Organizations want to innovate
to destabilize vs. People and
communities value stability
• As innovation goes up does
quality of life go down?
• Not all entrepreneurs are
innovative. What is the role of
entrepreneurship?
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17. Growth Driven by Diversity and Inclusion
• ICT has flattened the world.
• ICT facilitates inclusive growth
• Pursue “innovation diplomacy” - but
preserve national integrity
• Question: What are the
consequences of e.g., multi-national
corporations setting up offshore R&D
facilities or investing in offshore
facilities?
• Value diversity. E.g., ask what can
developed countries learn from other
economies. What does innovation
look like here?
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18. GDP as a Measure of Success
• With so much FDI, should we
measure economic growth using
GDP or GNI?
• Does GDP disguise other concerns,
such as income inequality?
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19. Other Measures
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• Reframe: isn’t economic growth
the means to the end?
• Use e.g., the Human Development
Index (or similar) as the the
dependent variable that matters.
• HDI: enlarge the choices
people have and allow
people to influence processes
that shape their lives.
• “For too long, the world has
been preoccupied with
material opulence, pushing
people to the periphery.”

20. 20
Questions For Discussion
UN Summer Academy on SDG

21. Questions for Discussion
• What is our context and how should this influence policy
choices?
• What are our national goals for innovation, growth, human
development, sustainable development, etc.
• What does good look like? How do we measure success?
• What innovation matters for sustainable development?
• How do we organize for innovation – e.g., NIS?
• What are our strengths and barriers?
• How do we foster a culture of innovation and
entrepreneurship?
• What other changes should we make?
• What is our plan?
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22. 22UN Summer Academy on SDG
“The only thing we know
about the future is that it
will be different.”
− Peter F. Drucker

23. 23
Unused Slides
UN Summer Academy on SDG

24. Appendix. E.g., from the US Department of State
• What tools can the United States use to promote innovation
and collaboration across borders to help solve pressing global
challenges such as climate change, food security, and public
health?
• How can we better promote innovation through U.S. foreign
policy? And conversely, how can promoting innovation help us
achieve foreign policy goals like fostering economic
development, reducing youth unemployment, and
empowering women and girls?
• And, how can the Department of State align “innovation
diplomacy” to support the U.S. economy, exports, and jobs;
the competitiveness of U.S. companies; and the value of U.S.
foreign direct investment?
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25. Basic Model: Drivers of Economic Growth (GDP pc)
Innovation:
Enhances
productivity
Innovation:
Leads to more
produced
capital
Human capital
underscores a
knowledge
based
economy
UN Summer Academy on SDG 25
Economic Growth (GDP)

26. Basic Model: Drivers of Economic Growth (GDP pc)
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• Exports – economies export
surplus’
• International
competitiveness
• Transition toward exporting
high tech products
• Measure FDI outflows
• Economic complexity index
Economic Growth (GDP)
Innovation:
Enhances
productivity
Innovation:
Leads to more
produced
capital
Human capital
underscores a
knowledge
based
economy

27. Productivity
• If innovation fuels productivity, by
allowing us to extract more from
factors of production….
• What about non-renewable and
renewable factors of production?
• Do we want to extract non-
renewable resources more
quickly?
• Do we want to encourage
more intensive farming
methods that harm the
environment?
• Should we reframe productivity?
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