Document(s) 13 of 22

Analysis of issues within the national system of innovation

XI. An innovation policy agenda for Chile

Our work has afforded us the privilege of gaining an overview of many of the facets of Chile's NSI. It has provided us with a wealth of information about the functioning of CONICYT and its main funds within this ever-evolving context. This experience permits us to highlight a set of issues that we believe should constitute the principal elements of a national discussion on the future evolution of innovation policy in the country. This is a debate that will be a necessary contribution to Chile's continuing insertion into the global economic community, and will provide the backdrop for the continuing development of CONICYT as a key institution of government.

In what follows, we briefly highlight these issues, which we put forward as an "Innovation Policy Agenda for Chile."

A focus on innovation

The time is ripe for debate on innovation policy in Chile to become much wider than a concern only of the Ministerio de Economía and its Programa Innovación Tecnológica. While PIT's work is valuable, it has not reached a sufficiently wide or senior audience. Yet it is dealing with the process which will need to become the basis of Chile's competitiveness in the years ahead.

Careful thought should be given to having all ministries consider how the promotion of innovative solutions to problems within their mandates could provide a general stimulus to innovation in the country. If government from the highest levels is seen to make innovation a priority, then the task of having the private sector invest more heavily in the process will become more feasible. If government does not provide a lead, then progress will be impeded.

We reiterate here that providing a focus on innovation is not a denial of the importance of investments in basic research. Rather, in our view, it provides a broader context within which to justify continuing investments in the pursuit of knowledge.

Issue: How can a national policy discussion be stimulated on the support of innovation?

Lack of policy framework and high-level structures to deal with innovation

Today, in the promotion of competitiveness of national economies, governments are discovering the need both to develop specific policies and programs to promote technological innovation, and to ensure that these policies are well-articulated with all of the other policies of government be they for education, health, international trade, environmental sustainability, or any other issue. To do this, governments must have a policy mechanism in place to both propose initiatives in innovation policy affecting all of government (and not simply the actions of an individual ministry), and to ensure that the mutual interactions of innovation policy and other government policies are explicitly considered.

We found no such executive mechanism in place in Chile today, but many individuals agree that one is needed. As we said earlier, any such mechanism must fit with Chile's political traditions and culture, and it should have the explicit support of the President of the Republic.

Issue: Will the Government of Chile assign a responsibility for oversight of innovation issues to a high-level mechanism within government?

Strengthening CONICYT as an institution as well as the operation of its funding mechanisms

We have paid particular attention to the performance of CONICYT and of its major funds, FONDECYT and FONDEF. We believe that the Minister of Education, on behalf of the Government of Chile, should undertake a restructuring of the governance of CONICYT. This will provide it with a management board with the authority to guide CONICYT in the execution of its mandate as a principal source of funding of research and innovation in the country. We also believe that there should be a transparent process put in place to streamline and simplify many of the administrative processes used by FONDECYT and FONDEF in their activities. All of this should be undertaken with a view to improving the effectiveness of the Chilean research and innovation system.

Issues: Will the Minister of Education reform the governance structures of CONICYT?

Will CONICYT, FONDECYT and FONDEF make adjustments in their policies and streamline and simplify the administrative procedures which they use in discharging their mandates?

The participation of the private sector

Despite the many good examples of innovative activities by individual Chilean companies, the available data still show that by global standards, investments by private enterprises in technological development are low. Against this background, many informed Chileans accept that past economic success based on exploitation of Chile's natural-resource endowment is unlikely to be sustainable, and that greater contributions are needed from the knowledge base of Chilean society. What is needed is an acceptance by private-sector management that investment in technical change is the surest route to competitiveness in the global economy. As well, recognition is required that even in enterprises that import technology from abroad, a local activity of continuous incremental upgrading is essential.

If the private sector is to engage systematic activities of technological innovation, the next question which arises in all countries, concerns the willingness of government to share in some of the risks.

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

Policy for support of SMEs

We believe that there is a need for greater attention to be paid in Chile to the problem of improving the management of technological change by SMEs. Also, a clear definition is needed of the role that the state plays in providing assistance. There are now signs that CORFO, assisted by INTEC, is ready to explore options for the creation of some form of technology extension system for Chile. Such an interest should be encouraged, and the inputs of SMEs sought through their organizations.

Issue: Is the Government of Chile prepared to design and implement a technology extension system suited to the needs of Chile's SMEs?

New company start-ups

It would be exceedingly limiting to base development of an innovation system on the presumption that all new, innovative business development will happen in and by existing enterprises. Certainly Chile's present enterprises need to embrace innovation. But it must be realized that current businesses have to be almost entirely focused on succeeding in their current field of endeavour. Therefore, they should rapidly discard ideas that divert them. Thus, an exceedingly important dimension is the successful start of new businesses, often built on new knowledge. We repeatedly heard that there is simply no risk-funding available, let alone the very high risk-funding required for start-up of new knowledge-based business. In addition, some countries have realized that it is not valid to assume that entrepreneurs - the people who see and pursue new opportunities - "just happen." There are educational and training approaches that increase understanding of what an entrepreneur is - and how to be one. New start-ups have been notorious for their rate of failure, but it is evident in successful start-up incubators, that provision of business-mentoring greatly improves the success rate.

We believe these are topics that need to be dealt with in Chile. It is possible that greater linkage with high-risk funding in the USA, which is very sophisticated, could be cultivated. However, this would undoubtedly require greatly enhanced attention to intellectual property protection. Chile might also adapt training and incubator approaches from elsewhere to its advantage.

Issue: Will the Government of Chile take the initiative to foster both the opening up of a market for venture capital and sources of training for entrepreneurs in the business skills which they need?

Policy for the future evolution of technology centres

The Government of Chile, through CORFO, has embarked on a process of policy reformulation to change the mode of financing and functioning of public technological institutes. This work has been accompanied by a parallel evolution in the terms-of-reference of some of the CORFO funds, and in particular of FDI.

We have earlier identified one missing element of this program of reform - the necessary reform of the membership of the governing boards of the institutes. There should be a significant representation of the private sector on the bodies which should have primary responsibility for agreeing with management on the corporate strategies and objectives of the institutes.

An element needing further public discussion relates to the public purposes that government wishes each of these institutes to fulfill. Where government has identified a public purpose - such as providing the research underpinning for managing a natural resource - it should be prepared to negotiate with the institute for the service that is required. For instance, a multi-year performance contract should be priced at market rates and include full overheads.

Issues: Is government prepared to reform the governance structures of technology institutes, and competitive funds, to provide for adequate representation of the private sector on the respective boards?

Will government negotiate performance contracts for those activities which it will expect the institutes to perform in support of public purposes and will it pay fair market prices and full overheads for services rendered?

Linking science, technology and innovation activities to regional development

We have seen that the commitment of the Government of Chile to the decentralization of spending power to regional governments is creating possibilities for regional spending on science, technology and innovation. In some cases, monies will come from the budgets of regional authorities; in others, as with INIA, it will come via introducing a regional voice into the spending decisions of a national program. These signs should provide particular encouragement to the universities and research centres outside of Santiago that should enjoy a natural advantage in competing for regional support.

Issue: How can regional authorities be convinced to allocate some of their spending to the promotion of innovative solutions to regional problems?

Human resource and institutional development issues

We sense that Chile has placed insufficient priority on HRD and on institutional development in resource allocation decisions affecting science, technology and innovation. The new MECESUP project is a good step in the direction of correcting this imbalance. But we see a clear need for more attention to be paid to training new people and to finding employment for them within the NSI. Without such attention, the research community will continue to age.

At the institutional level, we see a need to go beyond traditional investments in training people in the sciences and engineering, to introduce a needed emphasis on research management and on the commercial skills needed to successfully introduce an innovation into a marketplace.

Issues: Will Chile, and in particular its financing bodies, allocate increased resources to HRD to counteract the visible aging trend 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?

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Document(s) 13 of 22