TOWARDS A NATIONAL INNOVATION STRATEGY FOR COMPETITIVENESSVOLUME 1The Council is aware that public resources are difficult to obtain, and that other demands t<strong>en</strong>d to imposepolitical t<strong>en</strong>sions and difficulties on the authorities that can act against the growth objectives desired. In orderto make real progress in a greater availability of resources, it is necessary to clarify as much as possible whatthe State must do and what must be left to private initiative. Confusing roles leads to problems of capture andineffici<strong>en</strong>cy and to a loss of credibility in the State, the private sector and, ultimately, in ourselves. Thisexplains why in this report (Chapters 2 and 3) great att<strong>en</strong>tion is giv<strong>en</strong> to the conceptualization of analyticalfoundations that allow for an adequate separation and complem<strong>en</strong>tarity of roles betwe<strong>en</strong> the private and publicsectors, based on establishing the compet<strong>en</strong>ces and limitations of each sector. As may be deduced from theconcepts pres<strong>en</strong>ted in this report, our innovation system, ranging from the formation of human resources, tosci<strong>en</strong>tific research, adapting technology, and innovation in companies, exhibits some serious organizationalfailures that adversely affect its cost-effectiv<strong>en</strong>ess. Nevertheless, there are some very positive experi<strong>en</strong>ces insome areas. As such, organizational improvem<strong>en</strong>ts, an adequate structure of inc<strong>en</strong>tives and a precise definitionof roles betwe<strong>en</strong> the private and public sectors are ess<strong>en</strong>tial compon<strong>en</strong>ts in this task, in addition to an adequateprovision of resources.II. 2 A GREATER R+D ENDEAVOURAs indicated earlier, Total Factor Productivity (TFP) has become an ever more relevant aspect inexplaining the growth of countries. Ev<strong>en</strong> though various elem<strong>en</strong>ts affect it –the quality of institutions,macroeconomic stability, the op<strong>en</strong>ness of the economy, education and innovation-, rec<strong>en</strong>t studies havedemonstrated that the increase of TFP strongly dep<strong>en</strong>ds on at least two factors that are considered veryrelevant by the Council: the quality of human resources and research and developm<strong>en</strong>t sp<strong>en</strong>ding (R+D).Thus, an analysis of the behaviour of 15 countries of the Organization for Economic Cooperation andDevelopm<strong>en</strong>t (OECD) concludes that it is not correct to argue that rich countries invest more in R+D becausethey are rich, but rather that they are rich precisely because they invest more in R+D.The question we should ask is, How does Chile fare in this variable? A comparison with more developedeconomies which succeeded in positively changing their growth tr<strong>en</strong>d indicates that Chile sp<strong>en</strong>ds relatively littlein R+D. In 2004, Chile invested 0.68% of its GDP on R+D, compared to 2.4% by South Korea wh<strong>en</strong> it had a similarper capita income to that of Chile. or 1.3% by Ireland, or 1.4% by Slov<strong>en</strong>ia. The differ<strong>en</strong>ces are ev<strong>en</strong> greaterwh<strong>en</strong> compared to highly developed countries: Israel heads the list of nations that most invest on R+D with arate of 4.9% of GDP, followed by Swed<strong>en</strong> with 4%, Finland with 3.5% and the U.S.A. with 2.6%. In conclusion,39
TOWARDS A NATIONAL INNOVATION STRATEGY FOR COMPETITIVENESSVOLUME 1with the exception of Hong Kong, all countries with a level of developm<strong>en</strong>t the same as or above that of Chilehave higher proportional sp<strong>en</strong>ding levels on R+D, and, more significantly, already surpassed us wh<strong>en</strong> they hadsimilar developm<strong>en</strong>t levels to Chile. [See Figure 10]To achieve the goal pres<strong>en</strong>ted earlier of a per capita income level of US$25,000 within 15 years time,Chile’s R+D sp<strong>en</strong>ding should rise to 2.3% of GDP, which would require an annual increase in sp<strong>en</strong>ding of 13% until2021.An interesting tr<strong>en</strong>d observed in countries that invest strongly in R+D concerns the distribution of theinvestm<strong>en</strong>t initiative betwe<strong>en</strong> the private and public sectors. Developed countries have a high proportion ofprivate sector participation relative to the public sector. The comparable figures for Chile in 2004 were 37%private versus 53% public sp<strong>en</strong>ding 21 , but by 2021, 50% of resources should come from the private sector,reaching 1.24% of GDP (versus 0.25% in 2004), while public sp<strong>en</strong>ding should reach 0.7% of GDP (35% of the total).[See Figure 11]The low level of participation of the private sector, measured by R+D sp<strong>en</strong>ding, is evid<strong>en</strong>t in the figuresfrom the last Survey of Innovation and R+D in Chile in 2004, implem<strong>en</strong>ted on all companies, both public andprivate, from production sectors with over 2,501 UF: only 11.2 % of the <strong>en</strong>tire universe of 24,500 companiessurveyed invested in R+D.Other indicators of “inputs or activities for innovation” in the business sector, also show very low levels.An example of this is the number of establishm<strong>en</strong>ts that possess intellectual property rights (pat<strong>en</strong>ts, acquisitionrights of vegetable varieties or copyrights, not including brand names) which only reaches 10 % of the total.To add more data on the urg<strong>en</strong>t need for innovation in Chile, evid<strong>en</strong>ce is found in the literature indicatingthat there is a significant time lag betwe<strong>en</strong> making R+D sp<strong>en</strong>ding and its results in the TFP of countries 22 . Thisperiod averages four years, ev<strong>en</strong> though it can vary dep<strong>en</strong>ding on the production sector, and can range from twoyears, as in the electrical machinery and communication equipm<strong>en</strong>t industries, to five years, as in the case ofmedicines and pharmaceuticals.21 The remaining 7% comes from R+D carried out by foreigners in Chile.22 Rouvin<strong>en</strong>, P. “R&D-Productivity dynamics: Causality, lags and dry holes”, Journal of Applied Economics, vol. 5, Nº 1, pp 123-156.2002.40