Advancing Development Through Innovation

Since the late 1990s, the Brazilian government has enacted various policies and programs that form part of a larger innovation-focused development strategy. Brazil increased resources available for science and technology, encouraged greater collaboration between industry and universities, and fostered the creation of new institutions to facilitate increased private research and development spending. Despite these efforts, Brazil still faces many of the same challenges that other middle-income countries face: difficulty integrating and engaging with the global economy; reconciling an industrial strategy with innovation-oriented policy; and creating an environment conducive of greater R&D investment by the private sector.

In a new edited volume, Innovation in Brazil: Advancing Development in the 21st Century (Routledge 2019), Elisabeth Reynolds, Principal Research Scientist and Lecturer of Innovation and Economic Development, with co-editors Professor Ben Ross Schneider of MIT’s Department of Political Science, and Dr. Ezequiel Zylberberg, a Research Affiliate with the MIT Industrial Performance Center (IPC), unites a diverse array of empirical contributions to examine Brazil as a critical case study. Building from its rich and diverse contributions, Innovation in Brazil presents a new, forward-looking agenda aimed at addressing persistent challenges and exploiting emerging opportunities in Brazil. The volume also offers valuable lessons for other developing and emerging economies seeking to develop their own innovation-oriented development strategies. Increasingly, we see countries building development strategies that focus on R&D in addition to manufacturing, and attracting investments in higher value added functions to bolster their systems of innovation.

At the Department of Urban Studies and Planning, Reynolds studies innovation ecosystems, regional economic development and industrial competitiveness. Her current research focuses on the geography of innovation and work, with a particular interest in advanced manufacturing. In addition, Reynolds is Executive Director of the MIT Task Force on the Work of the Future and the MIT IPC.

Q1 What about Brazil makes it an interesting candidate to reflect upon advancing development through innovation?

Reynolds: Brazil, like most countries, incorporated more innovation-oriented policies into its development strategy beginning in the late 1990s and early 2000s. The results have been uneven. There have been some real successes in attracting foreign R&D investments, fostering university-industry collaborations, scaling successful startups and creating new institutions that build needed capabilities as well as introduce global standards and technologies to Brazilian companies. However, persistent structural challenges remain. Much like in other developing and emerging economies, bureaucracy can hinder efforts to foster innovation, appetite for risk is limited among entrepreneurs, investors, and policymakers, and policy evaluation is limited, making it difficult for government to assess what works and why. Brazil’s experience provides an interesting case for other countries pursing a similar innovation-led approach to economic development. The extensive investment in Brazil’s innovation ecosystem, has not always translated into significant benefits for the country. Understanding why is a central objective of the book.

Q2 With the global economy increasingly valuing knowledge creation and knowledge diffusion, what public policies might enhance a government’s push to be more competitive?

Reynolds: The reality today - even for a country like Brazil that has a large internal market - is that a competitive edge requires being more connected to the global economy. The arrival of a set of fast moving, complex, and globally integrated digital technologies and platforms presents both an opportunity and a challenge for Brazilian firms and organizations. One of the recommendations we make in Innovation in Brazil is that Brazil needs to strengthen its engagement with the rest of the world through participating in global value chains and knowledge networks, including through universities. Brazil has successfully launched an effort to attract multinational R&D centers. Efforts to integrate these centers with the rest of the innovation ecosystem and with the industrial base should be pursued. Relatedly, in the book we discuss creating greater alignment between innovation and industrial policy, as the former should bolster the latter, rather than work alongside it. Too often, the industrial base fails to build upon the value that the innovation ecosystem creates. And we point to past successes with mission-driven strategies around the development of particular industries or technologies (for example, in aerospace or clean energy). The pursuit of such programs requires stability, long-term vision, and insulation from politics.

Q3 Is increased innovation a positive aspiration for low- and middle-income countries? That is to say, if they succeed in becoming science and technology innovators like many of the high-income states, will they be reproducing the systems that have led to historic income inequality and anxiety over the future of work?

Reynolds: It’s important to understand innovation in its broadest context. When we talk about innovation, we are talking about innovation that can be in a science lab or on a shop floor. It can be new to a firm, a market like Brazil, or new to the world. It can all contribute to improving productivity and growth. How the benefits of that growth are shared is based on a larger set of economic and social policies as well as institutions. Higher income inequality is not an inevitable byproduct of increased science and technology innovation as is evident when we compare the U.S to other countries. Many European countries, for example, are leaders in science and technology and have much less income inequality than the U.S. In fact, countries with higher patent applications have greater social mobility. But people are justified to feel anxious about the future of work and what technological advances and innovation may or may not deliver. For many across the developed and developing world, particularly those with less education, the benefits of innovation have not been broadly shared. It is incumbent upon policymakers in low-and middle-income countries to see innovation as something that happens in traditional and advanced sectors, and to ensure that an innovation agenda is pursued in lock-step with social policies that ensure that society gains from these investments.