Friday, November 18, 2011

The imperative of innovation:creating prosperity in Latin America and the Caribbean

Today’s economies are increasingly becoming knowledge economies. The ability and speed with which societies can absorb new technologies, access and share global information, and create and disseminate new knowledge are the main determinants of their ability to function and compete.
Traces of these trends are everywhere: investment in knowledge-related activities has been growing faster than capital investment in advanced economies for at least a decade. The knowledge content of products and services is on the rise all over the world. The labor market shows a growing “skills bias” both in developed and developing economies, signaling that jobs growth will be in those occupations that involve sophisticated handling of symbols, information, and analysis. The most dynamic industries are those that can be classified as knowledge intensive, and all economic activities, even the most traditional, are increasingly influenced by technology and innovation.
Latin America and the Caribbean face the challenge of effectively embracing these transcendental changes. If the region is to create opportunities for the next generation to participate meaningfully in the global economy, science, technology, and innovation must be accorded the highest priority by leaders in both the public and the private sectors. The accelerated pace of innovation creates the need to build technological capacity in developing economies, if only to achieve the modest objective of becoming technologically literate in order to benefit from innovations originating elsewhere.
In 2010, the Inter-American Development Bank (IDB) published The Imperative of Innovation, a survey of the status of science, technology, and innovation (STI) in the Latin American and Caribbean (LAC) region. The region’s technological progress was found to be uneven and insufficient, especially in relation to other regions of the world.
In some cases, the region lost ground over the past 10 years in global rankings compared to some of the rapidly developing economies of East Asia. In other cases, the LAC region made progress, but so, too, did other regions. The book itself was very well received among policy makers, reflecting a growing interest on the part of its main intended audience. In a short period of time, a considerable amount of new evidence was collected as a result of a series of policy research initiatives, several of them carried out by the Science and Technology Division at the IDB, leading to even greater understanding of how innovation works in the region. This was the genesis of the second edition.
The main purposes of the second edition are to present updated information and to introduce some of the new research and policy know-how accumulated in the course of IDB lending and technical assistance operations in STI. Most of the original diagnostic remains unchanged, mostly in the initial section, although figures have been updated reflecting the most recently available data. The new figures and indicators presented in this edition are derived from the Compendium of STI indicators compiled by the IDB in late 2010.
Some highlights of the second edition include:
Further evidence of the positive effect of innovation on productivity at the firm level, including the finding that productivity gaps between innovative and non-innovative firms are larger in Latin American countries than in European countries (see particularly the beginning of Section I and Box 3).
New data on the positive impact of technology development funds on innovation outcomes and on business performance in the medium to long term (see Box 3).
New evidence of the complex relationship between innovation and employment, suggesting that the absence of innovation is associated with negative employment outcomes (see the special title dedicated to the issue in the first Section).
A description of an innovative project where the Science and Technology Division used crowd sourcing and Web 2.0 tools to conduct a participatory exercise in the area of technology for social inclusion, an issue of growing interest to policy makers across the region (see Box 10).

New evidence on gender issues in science and technology (see Box 1).
Although information and communications technology (ICT) was covered in the first edition, the second edition contains more information on the extent to
which connectivity, broadband, and the telecommunications sector generally are rapidly becoming central issues for governments, firms, and citizens, along
with STI and general economic policy. The infrastructure necessary to support ICT is a challenge to the region that should be addressed through new policies and publicprivate partnerships.
This volume reflects the IDB’s commitment to remain a key partner in the development of STI policy in Latin America and the Caribbean. It is offered as a contribution to the policy debate on the critical issues involved.
Flora Montealegre Painter
Chief, Science and Technology Division
Inter-American Development Bank
Prepared by a team in the Science and Technology Division of the IDB; supervised by Flora Montealegre Painter;written by Juan Carlos Navarro and Pluvia Zúñiga]. 2nd ed. p. cm. – (Monographs ; 111) Includes bibliographical references (p. 63-66). 2011

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