Libro Blanco Vol I en Ingles

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TOWARDS A NATIONAL INNOVATION STRATEGY FOR COMPETITIVENESSVOLUME 1Given this situation, the February 2006 report of the Council, as well as this Strategy, defines as a prioritythe large-scale increase of awareness in Chile –of its companies, its authorities and its workers– of the need toinnovate. The State is required to fulfil an essential role in this task, since given that innovation is “learned bydoing”, in the private sector there will always be an insurmountable difference between those who have alreadytried a new solution and those who have not.Moreover, those who know the benefits of innovation will have very little or no economic incentives totransfer this experience. This is evident, for example, in the fact that, even though today Chile has a range ofcompanies with a strong export culture in which competition and innovation are key factors of survival, thisexperience is not disseminated nationwide, even though, as this report has highlighted, they may be decisive forthe future of the country.63
TOWARDS A NATIONAL INNOVATION STRATEGY FOR COMPETITIVENESSVOLUME 12.1 MARKET FAILURES IN INNOVATIONEconomic science has explained in the last five decades why and under what conditions the markets workand when they do not. It has demonstrated, for example, that the markets can lead to the underproduction ofsome products, such as basic research, and the overproduction of others, such as pollution. Its most dramaticfailures are economic crises, recessions and depressions, but there are also another large number of more subtlefailures that prevent the markets from producing efficient results 30 .As such, to understand why innovation does not occur at the expected levels appropriate to the level ofdevelopment of the country, it is necessary to go where the market provides no answers. Putting the spotlighton these problems will not only help understand what is happening, but also to start designing solutions.Especially, if it is known that there is an underlying cultural problem and that it prevents the agents of thesystem from seeing all the present and future development opportunities.The first step of the analysis shows that there are at least four kinds of market failures that cross andaffect the innovation. These can vary in intensity, give rise to another and even add their effects to variousstages of the process.A. INSUFFICIENT APPROPRIABILITY. Who owns knowledge? This question surely causes sleep-loss to manyscientists seeking new knowledge, to the inventor who designs a revolutionary product, to the small businessmanwho wonders whether to venture into a design change, or to a large company that is evaluating whether toreduce costs or to opt for research that could radically change its production processes.Knowing who has the property of the knowledge also means determining who will get to keep theeconomic benefits arising thereof. The response to this is generally not very uplifting: knowledge is a publicgood that quickly escapes from the hands of its creator 31 . Therefore, investing in its creation tends to be badbusiness, even though collectively there is a clear economic benefit.Thus, the problems of appropriability become the most essential market failure inherent to innovation,also leading to many of the failures of information detailed ahead.This failure is most strongly felt in the most basic research, and as such, without public funding, this typeof activity would practically not occur. Even though as applied science progresses (research with medical orThe analysis of why innovation does notoccur at the expected levels with onlyprivate sector initiative reveals at leastfour types of market failures that crossand affect it: insufficientappropriability, information failures,intangibility of assets and networkfailures.The difficulty in privately appropriatingthe benefits of creating new knowledge isone of the main obstacles to innovation.Even though the collective benefit may bevery high, there is a lack of economicincentives to individually carry out anactivity that is crucial for the innovationprocess.30 Stiglitz, Joseph. Globalization and Its Discontents. Taurus, Buenos Aires. 200231 Its consumption is non-rival and can only be partially excluded.64
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