Document(s) 2 of 22

In August 1997, at the time of an APEC meeting in Vancouver, Canada, the president of Chile and the prime minister of Canada agreed that their countries would jointly commission a review of Chile's policies and programs of support in the areas of science, technology and innovation, given the importance of these activities to national economic performance in today's world of globalized competition among enterprises and economies. Later, during detailed consultations between representatives of the two governments held in Santiago, Chile in January 1998, it was agreed that CONICYT would act on behalf of the Government of Chile, while IDRC would act on behalf of the Government of Canada.

Formal terms of reference

The overall objectives of the study were to review, assess and report on:

• the policies, programs, priorities and policy instruments managed by CONICYT to promote the development and application of S&T within Chile;

• the interactions between CONICYT's principal policy instruments such as Fondo Nacional de Desarrollo Científico y Tecnológico (FONDECYT) and Fondo de Fomento al Desarrollo Científico y Tecnológico (FONDEF) as well as other similar policy instruments supporting Chilean scientific and technological activities, particularly those coordinated within the Programa de Innovación Tecnológica (PIT) and the impact of those instruments on the performance of scientific and technological activities within Chile's universities, enterprises and governmental S&T institutions; and

• the policy and institutional environment within which CONICYT operates.

Additional, more detailed terms were set for the evaluation of CONICYT's two principal funds, FONDECYT and FONDEF. These terms are set out later.

The use of the "functions of a national system of innovation" as a policy framework

In this report, we define "innovation" as the introduction into a market (economic or social) of new or improved products, processes or services. This simple definition draws attention to the importance of markets. Successful research or technological development programs that are designed to promote innovation must take full account of the constraints imposed by the market into which the innovation is to be introduced.

We would underline our belief that, depending on the specific circumstances, the products, processes or services in this definition may either be physical or intellectual. Innovations occur in all aspects of the life of a society, and not only in the economic market place where the term is most often used. The theory of relativity became an innovation in the market for ideas in theoretical physics when it was widely adopted. Its author, Einstein, was rewarded with prestige and respect - the currency of that market place.

In the industrialized countries, and in a growing number of newly industrializing countries, policymakers have found that the concept of an NSI provides a useful framework for technology policy formulation. This is because it makes explicit the many different kinds of necessary inputs to produce an economy that is innovative, and hence competitive, in today's increasingly globalized markets. We have chosen this framework as a means both of organizing our findings and of structuring our questions about what Chile is now doing. However, we do not treat the concept as a model to be implemented. We believe it is a useful and helpful guide to the analysis of a complex reality, rather than a prescription for ways in which to organize either institutions or programs.

Many countries today support programs of research to generally advance knowledge, in addition to programs that are designed to promote technological innovation. In those countries, a key question for public policy revolves around the relative allocation of resources from all sources to these two lines of scientific and technological activity.

For the purposes of analysis, an NSI can be thought of as a set of functioning institutions, organizations and policies which interact constructively in the pursuit of a common set of social and economic goals and objectives, and which use the introduction of innovations as the key promoter of change.

The phrase "system of innovation," as it is used in this paper, is a powerful metaphor for describing the many interactions among various participating institutions, organizations and firms, most of which operate independently of each other. The system encompasses some interactions that are cooperative, others which are competitive. In our use of this term, there is no single entity with the power to control the workings of the system - but there are many which exert significant influence over it.

The report reviews six sets of "functions" of Chile's NSI:

Central government functions

1. policy formulation and resource allocation at the national level;

2. regulatory policy-making;

Shared functions (involving the public, private and academic sectors)

1. financing innovation-related activities;

2. performance of innovation-related activities;

3. human resource development and capacity building; and

4. provision of infrastructure.

Policy formulation, resource allocation and regulatory policy-making

In a country that has no functioning high-level mechanism to look broadly at science, technology and innovation policies, it is not surprising that there is no discussion of the subject of a "science budget." That is, there is no means of displaying annually all of the proposed expenditures of government relating to its science, technology and innovation policies. This management tool will become necessary if government at the highest levels decides to become more involved in these issues.

Financing of innovation-related activities

Many of the issues and problems to be discussed in this report are intertwined with issues and problems outside the direct purview of CONICYT, including:

• the lack of an overarching government policy framework and coherence of structures for R&D, S&T and innovation;

• the culture of universities, institutes and the private sector - cultures that reinforce separation and different values, rather than converging interests and mutual interdependence of their futures (as in an effective NSI);

• the aging of university academic staff coupled with the lack of well-paid employment opportunities for the highly trained personnel who graduate from Chilean universities;

• the mechanism whereby universities in Chile receive their base funding and the behavioural implications of that mechanism (that is historical and inadequately linked with public policy and purpose); and

• the overall funding level for S&T.

As a basis for discussing possible directions for change, CONICYT's major funds are discussed in the context of the four terms of reference established for this review:

1. the ability of the instruments to meet established objectives;

2. the performance of the instruments in assuring quality, relevance and sustainability;

3. the capacity of the instruments to respond to changing needs, opportunities and research paradigms; and

4. the adequacy of the resource base.

FONDECYT

Overall, FONDECYT and its Superior Councils have significant support from the research community for professionalism, integrity and commitment. The FONDECYT programs have strengthened the Chilean capacity for research and instilled a culture of open dissemination of research through publications in refereed journals. However, the program delivery mechanism is unduly dominated by academic interests and a narrow disciplinary approach to research, so that there are inadequate linkages between the processes of discovery and utilization of knowledge. In fact, the FONDECYT Council appears to believe that the larger policy matters and promotion of S&T are not, and should not be, within its mandate.

We received comments from researchers, university administrators and FONDECYT officials concerning the processes used to assess quality and to allocate resources among competing projects. Overall, the program administration is seen as being transparent and honest, with a consistency of approach that was admirable. At the same time, a number of problem areas were identified:

• the system of external reviewers;

• the emphasis on publication counts;

• the need for more predictability; and

• the need for administrative flexibility.

Our impression of FONDECYT is that it has provided a credible and useful program structure that has the virtues and constraints of consistency. There have been only incremental changes in the core program areas until recent years, at which time a new program was introduced, Fondos de Estudios Avancados en Áreas Prioritarias (FONDAP), rather than a fundamental change of the existing project program. The FONDECYT Superior Councils noted the lack of an explicit mandate to take an active role in the development and promotion of S&T, and that other program initiatives had been limited by the lack of resources. We noted additional limitations in regard to adequate staff infrastructure and a governance structure that more adequately represents the diverse stakeholder communities.

In recent years, the world of research has been experiencing transformation, or at the very least, transition in how knowledge is generated, stored, transmitted and used. This includes transformations in the motivations, operation and organization of knowledge in institutions and their relationships with society. The new mode of generating knowledge is not designed to supplant, but rather to compliment more traditional investigation. This new mode is characterized by:

• operating within a context of application - problems and issues are defined and research organized in response to a particular context or application articulated outside the discipline or field of research;

• exhibiting trans-disciplinary characteristics - the research conceptualization and methodology goes beyond the cognitive and social norms for any one discipline;

• possessing heterogeneity and organizational diversity - the research team requires a diversity of skills and experience that change over time and in response to the evolving research requirements; and

• having social sensitivity and accountability - inclusion of social considerations in setting the research policy agenda, the decision-making and performance evaluation process. It recognizes that social values influence research directions.

Despite the controversy surrounding its birth, FONDAP represents a dramatic step in the evolution of long-range research in Chile. We cannot fail to notice the close alignment of the FONDAP objectives with the characteristics of the evolving and important modes of research identified above. The program has the potential to catalyze research that bridges the boundaries between traditional fields of investigation, by virtue of its focus on research themes, rather than disciplines, and the active encouragement of groups of researchers who work in an international context.

FONDEF

FONDEF was designed to provide a means of enhancing R&D related to national needs, while retaining a strong commitment to open market forces and the belief that governments cannot pick winners. At the time of its initiation, government recognized inadequacies in the S&T capacity in universities and technological institutes, as well as the positive externalities in public support of programs and projects

Four specific issues should be seen as priorities if CONICYT is to increase the effectiveness of FONDEF:

1. Increase the participation of companies, especially where the sector is not well developed in Chile (such as in manufacturing and value-added products). Encouraging meetings between regional and industrial sector is one such vehicle.

2. Encourage further evolution of the R&D culture in universities. This could be achieved by increasing the number of interdisciplinary projects, which entail inter-university, university-technical institute and university-company cooperation. Creating incentives for people to move between industry and university (in both directions) would be particularly effective.

3. Increase the level and quality of project management, especially of complex projects. This will require an explicit human resources thrust that produces technicians and managers as well as scientists and engineers.

4. Streamline program administration.

The future evolution of FONDEF will be conditioned by the evolution of an innovation culture within the private sector and the portfolio of program instruments around it, as much as through its own design. Situated within CONICYT, FONDEF has a key role in linking discovery with synthesis and application. As the most long-range element of the PIT portfolio, it reinforces the importance of the science-base in the national and regional systems of innovation. Its capacity to evolve will mirror the policy capacity of its governing bodies (FONDEF and CONICYT, and to some extent PIT) to continue to situate the program at a dynamic interface of research performers and users in Chile. The evolution of a Foresight-like tool (Martin and Irvine 1989) would be one means of creating an environment of continuous evolution within FONDEF.

CONICYT and policy development

Since its creation in 1968, CONICYT has had either explicit or implicit responsibility for defining policy at two different levels. It has had a responsibility in law for the provision of broad advice to the president of the Republic on matters of S&T policy. It has had the operational responsibility to manage its resources well, which implies a responsibility for developing internal policies to guide its own activities.

Earlier, we indicated our belief that the Government of Chile needs to define a mechanism to deal with science, technology and innovation policy at an overall level. Once a decision on that mechanism is taken, any ambiguity in the role of CONICYT with respect to advising on broad policy issues should be removed.

No matter what happens to CONICYT's role in national policy advice, we believe that steps should now be taken to improve its capacity to deal with operational policy issues in ways that take into account the needs of the constituency it serves and the changing global patterns of research organization and financing.

We believe that the time is ripe for a new Board or Management Council to be appointed to oversee the activities of CONICYT. It will play an active role in the development of policies regarding the use of the funds that will be allocated in future to CONICYT. In line with well-established practice around the world, the council should be of manageable size (say fifteen members), and have its membership drawn from the public, private and academic sectors. Members can serve on the council in a personal capacity, with the President of CONICYT as a member of that Council. The President of CONICYT could chair this council, as is the practice in many similar bodies around the world. The Council should also contain at least one member with functions relating to the operation of the Corporación de Fomento de la Producción (CORFO) funds. This will ensure clear articulation among the complementary roles being played by CONICYT and CORFO in the support of technological development.

CORFO funds

A challenge for FONTEC would be to stimulate more innovation in areas that will clearly be strategic in the 21st Century, particularly in the application of information technology (IT) and biotechnology widely throughout the economy. As the primary government supply-side instrument for innovation in the Chilean business sector, FONTEC has the responsibility not just to respond to project proposals. It must develop a culture of innovation in those areas that PIT's foresighting activities have already identified as being critical for knowledge-based economic growth in the future.

Any analysis of FDI must be done in conjunction with an analysis of the effect of baseline funding removal on the CORFO institutes. The reasons for the complete shift to competitive project based funding were:

• to widen the access to government funding for innovative projects from all sources and not merely from a few "privileged" institutes; and

• to ensure that government knows exactly what it is getting for its investment in innovation.

The funds coordinated by the PIT face three main challenges:

1. To facilitate the level of strategic research that is normally conducted by state-funded institutions (such as CSIRO in Australia, MINTEK and CSIR in South Africa), following the decision to shift all funding away from the technological institutes towards competitive, project-based funding.

2. To coordinate (or even amalgamate) the various funds in a creative way that is not excessively rule-bound, given that only a limited degree of content differentiation appears to exist, particularly between FONDEF, FONTEC, and FDI. Even for these general funds, the main focus is on agriculture, forestry and fisheries, generating a possibility for overlap with FIA and FIP.

3. To support innovation that is consistent with plans for and which assists current patterns of economic growth. This will perhaps be the most onerous challenge. Clearly the strengths in Chilean applied research currently lie in agriculture, forestry, and fisheries. It is in these areas that the majority of innovative proposals originate. However, today the Chilean economy is growing much faster in the industrial, commercial, infrastructure, and service sectors. Researchers should, therefore, be actively encouraged to align their proposals with these changes. A better focus of effort will bring benefits not only to the economy but also to the researchers themselves, because these new areas are clearly where local and international private-sector investment will be channelled.

Performance of innovation-related activities

The universities

The research-funded universities are the principal sites for basic and applied research in Chile. Because of this, these centres stimulate a huge amount of interest among young Chileans who are pursuing research. These are important and appropriate roles for such institutions so public policy should ensure that such universities have the means available to fulfill the tasks involved.

We welcome the proposed review and accreditation of universities that is supposed to be undertaken within the MECESUP investment now being launched by the Ministry of Education with some support from the World Bank. This process should entail a review of research activities and result in investment in research infrastructure and salary levels as well as in student research support in those locations identified as demonstrating excellence.

There is a widely acknowledged need for Chile to come to terms with the aging both of its research system and of its university faculty.

Development of a strong, popular, post-graduate research system will be evolutionary, requiring the achievement of recognition of domestic graduates and the provision of employment opportunities. In the meantime, a great deal could be achieved for innovation in Chile by creating expanded opportunities for graduate students and new opportunities for undergraduate students to obtain research experience. These two groups will impart vitality to the process and be receptive to the use of new knowledge after leaving university.

Technological institutes

We visited a sampling of six institutes, three of which were CORFO organizations - la Corporación de Investigaciones Tecnológicas (INTEC), el Instituto Forestal (INFOR), and el Instituto de Fomento Pesquero (IFOP). The other institutes included in our sample were the Fundación Chile, el Instituto Nacional de Investigación Agropecuaria (INIA), and el Centro de Investigación Minera y Metalúrgica (CIMM).

Although most do some research, their attention is really and properly focused on problems of development and adaptation, as contrasted with the FONDECYT emphasis on basic discovery. There was only a little evidence of connection between the institutes and universities. It was disturbing to find that INIA, for example, now perceives universities as competitors for funding rather than as the partners that they were in the past. Making researchers' salaries dependent on them winning research grants must heighten this sense of competition.

The current emphasis on competitive funding for the technology institutes is intended to have them operate in a manner more directed to client and national needs than previously was the case. The manner in which the competitions are operated would then have a very real shaping influence on the institutes. It would be logical for the intended clients to have a significant role in this. We have only limited information on this point. It would seem, however, that today's level of dependence on competitive funds by CORFO institutes means that, out of necessity, they have pursued funding from financing sources which do not insist on close client linkages at the expense of retaining the sought-after client orientation.

Firms in the private and public sectors

Official statistics show that the Chilean private sector currently funds about 18 percent of the country's R&D, but performs a mere 3 percent of these activities. If this figure is accurate, it reveals an astonishing gap in the NSI. One reason why 3 percent might be a serious underestimate is that expenditure on R&D is not recognized explicitly as a tax write-off, and is counted merely as a general cost.

When we interviewed business leaders on the topic of innovation, the following issues emerged:

1. Although there are strong links between business and universities, particularly at the human-resources level (for example, there is a tradition of part-time professorships being held by businessmen), the university mentality is not geared to solving problems within a business timescale. This is a frustration. Funding is not nearly as much of a problem as is the orientation of the researchers.

2. Patenting is not well developed in Chile. It is hard to measure what constitutes the real outputs of R&D.

3. There are real success stories of industry-university collaboration. In the case of REUNA, the Chilean Internet company, several years were gained by the farsightedness and drive of engineers with strong university links.

4. Venture capital is hard to obtain and it is difficult to convince financial institutions of the value of knowledge-based industries. To obtain funding for innovation which is entirely new, rather than simply incremental, is also very difficult. A concerted campaign needs to be run to change this.

5. Generally, the PIT funding system does not take industry's advice as to which areas of research are important. There is a need for the state to support long-term research, rather than simply reacting to the proposals of researchers. The method of Technology Foresight should be investigated.

6. Indirect incentive mechanisms such as tax credits should be urgently investigated.

7. Knowledge-diffusion mechanisms in Chile are completely inadequate, particularly with regard to supporting SMEs. The government places a lot of emphasis on generating knowledge, but none whatsoever on diffusing it.

The private sector effort is central to any program to embed innovation in the economic life of the country. It is essential, therefore, to develop a good portfolio of measures to stimulate and support innovation in the private sector. Recently, with the introduction of funds such as FONDEF and FONTEC, Chile has begun to support direct incentives. However, a great deal of suspicion still exists with respect to indirect incentives. Although this caution may prove well founded, there is a growing body of international experience in tax incentives for R&D and innovation that includes many positives. We strongly recommend that Chile acquaint itself with this information by means of a formal study.

Human resource development and capacity building

We have heard that the training of professional technologists - those skilled people with a practical rather than theoretical basis to their training - is relatively neglected in Chile, as it is in almost all other countries of the region. This should be a concern to policymakers since the internal levels of technological competence needed throughout firms are increasing. Therefore, more and more entry-level positions will need young people with a solid basic education in technology. Colleges provide one means of addressing this need.

One of the dominant features of the research community in Chile is the small size of the typical research groups in most of the institutions that we visited. Only in a few locations were we conscious of attention being paid to the tasks of research management. The skills involved are complex, even more so when applied to the process of technological innovation with its requirements of blending the contributions of science, technology and the skills of the market place. However, as in almost all countries, Chile operates on the unsubstantiated hypothesis that the best researchers are automatically the best research managers. It is our belief that there is an established pool of knowledge in the area of management of research which can and should be accessed by those Chileans in who will undertake leadership roles in Chile's NSI.

Provision of infrastructure

The lack of emphasis on patenting in the Chilean research system is worrying. Recent evidence demonstrated by the rates of citation of research articles in US patent applications indicates that there is an increasing connection between high-quality scientific research and innovation. FONDECYT, FONDAP and even FONDEF are currently not sensitive enough to difficulties experienced by researchers in reconciling the bibliometrically-based evaluation criteria for funding with the requirements of patenting their work.

Chile currently has a telecommunications infrastructure and portfolio of services to rival any in the world. This is a crucial contribution to the level of competitiveness of the Chilean economy.

The creation of the Red Universitaria Nacional (REUNA) has been decisive in the development of Chile's Internet access and must rank as one of the singular successes of the FONDEF program. FONDEF has succeeded in stimulating collaboration between academic researchers and the private sector in an absolutely key area. The result is that Chile now has the largest number of Internet hosts per unit of population in Latin America.

The commitment to an excellent library service is not surprising in a research system which emphasizes publication to the extent that Chile does. Nevertheless, it is heartening that university authorities have had the foresight to invest in modern infrastructure and are sensitive to the needs of researchers in this regard.

Chile is extremely fortunate, probably more so than any other country at an equivalent stage of development, in possessing the natural conditions to enable it to attract major international scientific infrastructure. The only developing countries which have attracted equivalent scientific interest - unfortunately unmatched by infrastructural investment - are those in the Middle East and Africa, both of which are rich in archaeological and cultural deposits.

It is encouraging that in the most recent agreement to build another foreign-financed telescope in Chile, the government has included a provision in the contract to ensure the participation of Chilean engineers in the construction and infrastructure activities. Gaining access to challenging assignments is an advantage for Chile's engineering profession also.

Policy issues emerging from the review

The review provides an introductory discussion of some topics that should be addressed in Chile:

• institutional governance;

• the need for prioritization;

• technology for SMEs;

• promoting an innovation "culture" in Chile;

• support for the social sciences; and

• support for health research.

The question, however, is whether the competition underlying Chilean S&T policy has anything to do with a real economic market. Innovation is part of a competitive strategy, not merely an analogue of it. Even in fields close to the market, lag times of several years are normal. Given the strategic and long-term nature of research, the innovator needs to anticipate markets and to choose areas where there is a potential advantage. If funds to promote innovation are to work optimally, they should also be able to anticipate strategic areas. The beginnings of such an approach are to be seen in FONDAP, and the large astronomical observatories offer a huge advantage to Chilean astronomers.

Chilean scientific culture values transparency and clearly stated criteria. A way to arrive at such criteria, mediated naturally by competitive rules, would be to conduct a Technology Foresight study. In such a study, a very large section of the S&T community would itself be involved in determining strategic foci. The programs and projects which flowed from this process could not be labelled as arbitrary. In a country where the availability of resources is not high, these choices need to be made to give the most promising areas an appropriate critical mass.

Beyond these points, we end by proposing an "Agenda for Innovation Policy" in Chile that deals with nine substantive topics, within which we identify key issues for debate.

1. Focus on innovation: How can we stimulate a national policy discussion on the support of innovation?

2. Lack of policy framework and high-level structures dealing with innovation: Will the Government of Chile assign responsibility for overseeing innovation issues to a high-level government mechanism?

3. Strengthening CONICYT both as an institution and the operation of its funding mechanisms: Will the Minister of Education reform the governance structures of CONICYT? Will CONICYT, FONDECYT and FONDEF make adjustments in their policies? Will they streamline and simplify the administrative procedures that they use in discharging their mandates?

4. Participation of the private sector: How can government engage the private sector in some joint commitments with respect to long-term investments in Chilean science, technology and innovation?

5. Policy for support of SMEs: Is the government prepared to design and implement a technology extension system suited to the needs of Chile's small- and medium-scale enterprises?

6. New company start-ups: Will the government take the initiative to foster both the opening up of a market for venture capital, and sources of training for entrepreneurs in the required business skills?

7. Policy for the future evolution of technology centres: Is government prepared to reform the governance structures of technology institutes and competitive funds to provide for adequate representation of the private sector on their respective boards? Will government negotiate performance contracts for those activities which it expects the institutes to perform in support of public purposes? Will it pay fair market prices and full overheads for services rendered?

8. Linking science, technology and innovation activities to regional development: How can regional authorities be convinced to allocate some of their spending to the promotion of innovative solutions to regional problems?

9. Human resource and institutional development: Will Chile, and in particular its financing bodies, allocate increased resources to human-resource development to counteract the aging trend visible in many of its science, engineering and technology institutions? Will more attention, in institutional capacity-building, be paid to the need to strengthen the technology management and commercial skills of key staff?

Copyright 1999 (c) International Development Research Centre
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Document(s) 2 of 22