Why internationalize rd

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View Item. Bernhard Dachs. A key determinant of the development impact on a host economy is its absorptive capacity. By extension, the improved competitiveness of TNCs often has positive impacts on their home economies. These concerns resemble those voiced in connection with the general debate on services offshoring. The trend is so new that any assessment must be tentative. Rather, to turn the internationalization process into a win-win situation for host and home countries alike, policies aimed at advancing the specific innovation capabilities and the functioning of the NIS are key.

Enterprises are the principal agents of innovation. However, they do not innovate and learn in isolation, but in interaction with competitors, suppliers and clients, with public research institutions, universities and other knowledge-creating bodies like standards and metrology institutes.

The nature of these interactions, in turn, is shaped by the surrounding institutional framework. Its strength can be influenced by government intervention. The starting point is to build an institutional framework that fosters innovation. Particular policy attention is needed in four areas: human resources, public research capabilities, IPR protection and competition policy. Efforts to secure an adequate supply of human resources with the right skills profile involve educational policies — not least at the tertiary level — and measures to attract expertise from abroad.

The policy challenge is to implement a system that encourages innovation and helps to secure greater benefits from such activity, notably when it involves TNCs. At the same time, in order to balance the interests of producers and consumers, IPR protection needs to be complemented by appropriate competition policies.

Efforts in these areas need to reflect the comparative advantage and technological specialization of each country as well as the development trajectory along which a country plans to move. Selective policies in this area can include targeted investment promotion, performance requirements and incentives along with science and technology parks.

It can potentially serve two prime functions. Finally governments need to pay attention to more focused policies aimed at boosting the capabilities of the domestic enterprise sector, notably through industry-specific and small and medium-sized enterprise policies.

The various objectives of education, science and technology, competition and investment policies can be mutually reinforcing. Whether a country tries to connect with global networks by promoting inward FDI, outward FDI, licensing technology, the inflow of skills or through any other mode, policies need to be coherent with broader efforts to strengthen the NIS. In essence the policies pursued need to be part of a broad strategy aimed at fostering competitiveness and development.

Indeed, the emphasis on policy coherence may be one of the most striking lessons learned from those developing countries that are now emerging as more important nodes in the knowledge networks of TNCs.

In most of these countries, the starting point has been a long-term vision of how to move the economy towards higher value-added and knowledgebased activities. The success of some Asian economies is no coincidence; it is the outcome of coherent and targeted government policies aimed at strengthening the overall framework for innovation and knowledge inflows. In some form and to varying degrees , they have actively sought to attract technology, know-how, people and capital from abroad.

However, that is not an excuse for a lack of action. Rather, countries should consider how to begin a process through which economic and technological upgrading could be fostered. The creation of innovative capabilities is a path-dependent and long-term task. For latecomers, ensuring that a process aimed at strengthening their NIS gains momentum is an essential first step.

For home countries, current trends accentuate the need to rely even more on the creation, diffusion and exploitation of scientific and technological knowledge as a means of promoting growth and productivity.

They may also see the need to specialize more in areas where they hold a competitive edge to strengthen existing world-class centres of excellence and build new ones. Policy-making at the national level also has to consider developments in international investment agreements at various levels. Some recent agreements at the bilateral and regional levels have extended the minimum standards set in the TRIPS Agreement. For developing countries it is therefore important to understand and make use of the flexibilities contained in the TRIPS Agreement.