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White Paper
White Paper
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Stimulation of Investment of
Private Sector into
Research and Development in India
Report of
The Joint Committee of Industry and Government (JCIG)
Bhan MK
Bhartia HS
Brahmachari SK
Forbes N
Nayak S
Gopalakrishnan S
Ramasami T (Co-Chair)
Muthuraman B (Co-Chair)
May 2013
Bhan MK
Bhartia HS
Brahmachari SK
Forbes N
Nayak S
Gopalakrishnan S
Ramasami T (Co-Chair)
Muthuraman B (Co-Chair)
Foreword
31 May, 2013
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The white paper is now available for detailed examination by both industry
and government for early implementation. I sincerely hope that the key
recommendations would be acted upon in a time bound manner and their
impact on Indian R&D would become tangible and traceable.
01
Acknowledgements
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The Joint Committee of Industry & Government would like to thank the
Department of Science & Technology, Government of India for the
opportunity to develop the White Paper on Stimulation of Investment of
Private Sector into Research & Development in India.
A comprehensive study of the current national scenario in private sector
investment in R&D and practices adopted by many other countries in this
area as well as feedback and suggestions from wide stakeholder
consultations have been used as the basis for developing this white paper.
The Joint Committee acknowledges with thanks all those who made
important suggestions and provided inputs in the preparation of this White
Paper. We are pleased to submit this report to the Ministry of Science &
Technology, Government of India.
02
Bhan MK
Bhartia HS
Brahmachari SK
Forbes N
Nayak S
Gopalakrishnan S
Ramasami T
Muthuraman B
Shukla BK
Das A
CONTENTS
Page no.
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 01
Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 02
1
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 05
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03
c) The JCIG has recognized a need for special thrust in some priority
areas and sectors for building global leadership and to develop and
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b) Make it mandatory for all Public Sector Units and the Corporate
Sector to report and declare investments into R&D in the Annual
Report.
05
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f) Commercialization of R&D outputs is a key step. Public-PrivatePartnerships and well designed incentive mechanisms to trigger
commercialization of R&D outputs would be required to stimulate
private sector investment into R&D.
06
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07
Corporate sector is focused on R&D with shorter time to marketneeds. Time to market for the R&D outputs emanating from
public funded R&D in India needs to be minimized and extent of
commercialization of Intellectual Properties generated through
public funded R&D should be increased significantly.
Commercialization of IPs does involve several steps including
significant investment and completion of the entire R&D value
chain, viz. translation R&D, pilot studies, establishment of testbeds etc. These are defined to minimize risks of failure. Inclusion
of investments of private sector for such risk minimization
protocols as R&D costs seems justified and these are included as
R&D costs in many countries.
Both, the Government and Industry in India are equally concerned
that the private sector investment into R&D is less than optimum
levels in comparison to the current trends in global best
practices.
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One of the recommendations emanating from the subcommittee on PM's Council on Trade and Industry for PPP for R&D
and clean energy is that the policy environment would need to be
triggered for stimulation of investment of Private sector into R&D
in India. The report of the steering committee constituted for the
development of the 12th Plan for S&T Sector also aims at an
investment of private sector into R&D to match the levels of
public investment planned to be invested during the plan periods.
08
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09
th
The size of the 12 Plan for S&T sector has now been estimated
with a public investment of Rs. 1,20,430 crores in only six
departments. Additional investments are planned under Defence
Research Development Organization, various other socioeconomic ministries as well as academic and state sectors. The
table also presents an approximate phasing to achieve the target
of 1% of GDP each as mentioned above.
12thPlan (2012-17)
Outlay (Rs. Cr)
19,878
21,596
Department of Biotechnology
11,804
17,896
Department of Space
39,750
9,506
Grand Total
1,20,430
Source: Draft 12th Five Year Plan 2012-17, Volume 1 ,Planning Commission, GOI document
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10
Year
2011
2012
2013
2014
2015
2016
76%
73%
67%
61%
56%
50%
24%
27%
33%
39%
44%
50%
th
Source: Report of the Steering Committee on S&T for the formulation of 12 Five Year Plan
R&D would become necessary if the targets of 12th plan for R&D sectors were
to be fully realized.
The JCIG is of the view that the current investment of the private sector into
R&D might be underestimated and the estimate may not capture all
investments being made by the non-government sectors in India. The JCIG
also emphasized the importance of validating the data on investments of
private sector into R&D and establishing a continuous updating mechanism.
The JCIG focused on the need to critically assess and agree upon various
elements of the key enablers for boosting private sector's investment to
match the expectations as planned during the 12th Five year plan. The JCIG
resolved that if the Indian industry were to match the global benchmarks of
investments into R&D, the policy environment in India as well as classification
of what qualifies for grouping under R&D in India should also match those of
major countries. The global bench marking study was commissioned to CII
for ensuring realistic comparisons. The JCIG decided to concentrate on the
following five major tasks in order to arrive at the recommendations:.
l
Studying
globally
l
Revalidating the data on private sector investments into R&D in India
l
Identifying
R&D
various policy instruments deployed by other countries for
maximizing the provisions and benefits of PPP for R&D as tools of change
in manufacturing and
l
Suggesting
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2.4
l
Studying
11
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In addition to using its internal knowledge base with its members and
others, CII commissioned a research study to Arthur D' Little for
generating inputs for the elements listed above in order to have a fuller
and more authentic picture in a short time. While a detailed report on
Global Trend is attached in Annexure 2 as Background Information,
salient features of the research findings are summarized in this section.
Regarding the information about India, remarks about such items
qualified as R&D expenditure, incentives etc, are made in this section
only in a brief manner. Further details about India are presented in the
next section while making the recommendations of JCIG.
% of GDP
0.4
0.35
0.3
0.25
0.045
0.2
0.15
0.1
0.18
0.05
0
USA
0.075
0.08
0.047
0.12
0.15
0.15
0.083
UK
France
0.06
0.058
Germany
Israel
0.075
0.03
Japan
South
Korea
Finland
Indirect funding refers to all tax incentives related to R&D; tax credit
l
allowances, social security contributions, reductions in R&D, labour
taxes
o Japan, Netherlands and Canada rely mostly on tax incentives
Countries such as France and USA combine both instruments namely
l
India generally
l
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Nature of
benefit
available
14
Extent of
income tax
benefit
available
Specific
approval
required
from
government
IP to
reside
in the
country
USA
Income tax
Plain
at the federal deduction
& state levels and tax
credit
No
Carry forward No
Yes
No
UK
Income tax
& cash
subsidy
Super
deduction
No
Refundable
and carry
forward and
carry back
No
Anywhere
Yes/No*
France
Income tax
Refundable
and carry
forward
No
Yes
No
Yes
Yes
Yes
Israel
Income tax
& cash
subsidy
Super
deduction
Yes
Refundable
Anywhere
(for tax
benefits
For grants
(only Israel)
Yes
Japan
Income tax
Tax credits
No
Anywhere
Yes
South
Korea
Income tax
& cash
subsidy
Tax credit
No
Carry forward No
Anywhere
No
Yes
Land &
Building
Materials &
Equipment
Services/Prototypes
/Pilot Plan
Others
Prototyping Cost
Standardization
expenses
Technology watch
expenses
Treatment
Divided
Trial production
Divided
Divided
Excluded
Excluded
Excluded
Excluded
Remarks
Design during R&D is
included and design during
production is excluded.
Included if testing involves full
time testing and subsequent
further design and engineering
Include feedback R&D and
subsequent improvements in
processes of production
Except feedback R&D
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Item
Industrial design and drawing
There are certain border line items, as listed below that are treated
differently in OECD countries, as compared to other countries.
15
France
Germany
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USA
16
Japan
South Korea
Incentives
l
Allowable expenses related to costs incurred for maintenance of
professional or vocational skills
l
Study loan allowances
l
Income tax credits for educational expenses in higher education and in
secondary education
l
Tax credit on interest burden of loans incurred by students in higher
education to finance their studies
l
Income tax exemption on wages earned by apprentices
l
Income tax exemption on wages earned by pupils and students working
during school or university holidays
l
Deduction of education/training costs as income related expense
l
Deduction of education/training costs as a special expense
l
Deduction of tuition fees for own children in private schools
l
Loans up to $30000 given by various state universities for doctoral
students with a payment period of up to 15 years
l
Waiver up to 20 per centon loans if the candidate joins the same
university
l
Tuition deduction of up to $4000 for expenses on higher education of
children, spouse or any other dependant
l
Interest deduction on student loans or payment of loans by the
government during college.
l
Full or partial remission of tuition fees is granted on meritocracy and
need basis in both national and private universities
l
Japan Student Services Organization (JASSO) gives loans (interest free
and low interest) to students with outstanding academic achievements in
post graduate programs.
l
Talent development program supporting and mentoring students.
l
International scholarship policy forum which collaborates with world
bodies and institutions for donation.
l
Separate national scholarship for science and engineering
In India, such clear-cut provisions do not exist. Tax deductions exist for
contribution to educational institutions but they are not to be linked
with industry's main R&D needs.
Countries Scheme
Features
Guarantor
USA
l
Enable small businesses to
l
The state provides collateral
UK
National Loan l
Helps businesses access cheaper l
Guarantor does not
Guarantee
finance by reducing the cost
guarantee loans to
Scheme
of bank loans
businesses
l
l
(NLGS)
Specific banks participate in
Individual is liable for
the scheme
repayment of NLGS loans,
l
Businesses are eligible by:
the government holds no
v
Having less than 50 million in
collateral
revenue
v
A business contributing to the
UK economy
v
Is not in financial difficulty
l
Businesses in NLGS receive a
discount of 1% on their loan
compared to the interest rate they
would normally have
l
Individual banks determine max/min
amounts that can be borrowed
l
NLGS qualifies as state aid to
businesses as per European
Commission regulations
Germany
German United l
Improves collateral situation and
Loan
Guarantees
financial credibility
l
Provides lower interest rates
l
Help banks lower credit risk
l
Government provides
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State Small
Business
Credit
Initiative
(SSBCI)
17
Countries
Germany
Scheme
German
United Loan
Guarantees
Features
Guarantor
l
Criteria
v
Young industries without history
v
Dynamic companies in difficult
industries
v
Crisis situation
requiring
venture/equity capital
v
Projects must contribute to
economic development of
Germany
v
Managed by PwC with a
local partnership
Israel
Israeli R&D
policy
l
The main OCS program (the
l
The state automatically
l
If not successful, the company
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International
Cooperation
Loan
Guarantee
scheme
18
l
Government organization
Countries
South
Korea
Scheme
Korea Credit
Guarantee
Fund (KODIT)
Features
l
Public finance institution
Guarantor
l
By guaranteeing the
v
P-CBO guarantee
l
KODIT guarantees loans from
private banks
l
Has helped SMEs out of oil crises
and the recent financial crisis
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2008-09
2009-10
2010-11
2011-12 2012-13
(estimate)
2000
2526
2416
4685
5745
6335
Computed investments
of Private Sector into
R&D based on tax
foregone estimates
(Rs. in Crores)
6060
7654
7321
14196
17409
19197
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3.1.1
3.1.2
3.1.3
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l
100% write
l
100% write
l
Weighted tax deduction @200% for sponsored research programs in
l
Income-tax exemption @175% to donations made to approved non-
l
Customs
l
Central
l
Central
25
l
Exemption
l
Pharmaceutical
l
Goods
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Special Incentives
3.3.1
3.3.2 A provision may be made where the profit generated from the
revenues of new products from IPR acquired from Public Funded
Institutions would be tax exempt for 1-2 years.
Public Procurement and standards
3.3.3 20% public procurement from Indian MSMEs on the products and
services commercialized from public funded R&D.
3.3.4 L1 Criteria and insistence on Past Track Record (PTR) discourages
innovations. Weightage by way of price preference or otherwise
may be given for indigenously developed products and technology.
Incentivize industry to use indigenous products and technology to
help create PTR.
3.3.5 Standards and their compliance should be used effectively to give
advantage to indigenous products and technology. This practice is
followed by most of the developed countries.
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Loan/Equity
l
Financial
l
Financial
l
Financial
l
Apart from the current direct incentives to the private sector for R&D,
the following direct incentives will be provided from 2013-14:
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3.4.2 A 50:50 PPP fund may be created to provide 75% support to private
sector for R&D and deployment/commercialization of technologies
with public institutions (public or private universities/colleges) in the
sectors/areas of social welfare such as affordable healthcare,
renewable energy, water treatment/purification, waste treatment/
processing etc.
3.4.3 A special fund (generated from R&D Cess received by Government) on
Global Partnerships may be launched where the Indian industry will
partner with global partners for R&D, technology acquisitions,
deployment/commercialization of technologies and, capacity
building of human resources. This fund may be administered by
Global Innovation & Technology Alliance on a 50:50 funding
mechanism on a case to case basis.
Priority sectors for PPP R&D
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3.4.5 PPP model for R&D as infrastructure projects needs to be worked out.
Renewable and clean energy is a nationally important sector. PPP for
such sectors for R&D may need new instruments of partnerships.
Public procurement from R&D based manufacturing is a globally
accepted policy for consideration.
Incentivize Joint R&D
3.4.6 Investment by private sector for R&D with public institutions in any
sector/area may be matched on a 50:50 basis or more by public funds.
The proportion of public fund may go up to 75% in case of MSMEs.
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3.4.10 Government grant up to 50% of the salary of (a) PhD scholars from
Indian institutions appointed by industry and (b) PhD scholars of
Indian origin from overseas appointed by industry.
31
Support Infrastructure
3.4.14 Government grant up to 50% of the R&D infrastructure cost incurred
by the industry.
Support Start-ups
3.4.15 A special end to end package for Technology driven Startups may be
developed to fuel technology-driven entrepreneurship in the
country.
l
Cosmetics and toilet preparations.
l
Tooth paste, dental cream, tooth powder and soap.
l
Aerated waters in the manufacture of which blended flavouring
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l
Gramophones,
32
records.
l
Projectors.
l
Photographic apparatus and goods.
l
Office machines and apparatus such as typewriters, calculating
l
Safes,
doors.
l
Latex foam sponge and polyurethane foam.
l
Crown
l
Pilfer-proof caps for packaging or other fittings of cork, rubber,
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Current financial audit procedures are risk averse and prohibit risky
ventures. In the deployment of public funds and loans from banks
especially, R&D led innovations do not receive adequate support.
35
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Under CSR
Technology Business/
Incubation of Start-ups
Prototyping
Training / Education of
Industry Personnel
Test Beds
Skills Development
Design
Employment Generation
Scholarships
to PhD Scholars
Education
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Direct R&D
Plant & Machinery
l
l
Materials & consumables
l
Utilities & services
l
Human Resource
37
The JCIG, after studying various factors, has made six key recommendations
for consideration of the Government for creating a policy environment which
could stimulate higher investments by private sector into R&D consistent
with the goal of Science, Technology and Innovation Policy, 2013, released in
January 2013. One of the goals of the 12thFive Year Plan is to trigger and
stimulate private sector investments for matching those by the Government
by the end of 2017. In order to achieve such targets, JCIG considers that the
recommendations made below may be of value:
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A percentage of payments
received from the industry
to be shared with individual
inventors in the line of existing
guidelines of IITs, IISc and
CSIR
Increase commercialization of
R&D outputs from public
funded R&D through
performance related incentive
system
Note: It may be noted that many suggestions and recommendations mentioned in the Chapter 3
of this report, could not find place in the final six key recommendations. While all the suggestions
have been found important and necessary, the JCIG felt that immediate actions should start with
a few items to be implemented in 2013-14. However, the JCIG will look at all other suggestions;
those are important and will take appropriate recommendations to the Government for
consideration in later years.
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Annexure - 1
No. l6/1/2011-NEB
Government of India
Ministry of Science & Technology
Department of Science & Technology
Technology Bhawan
New Mehrauli Road
New Delhi-II 00 16
Dated: 30th November 2011
OFFICE ORDER
Sub: Constitution of "Joint Committee of Industry and Government for
stimulating private sector investment into R&D".
Pursuant to the decision taken during the interactive session with Hon'ble
th
MOS (S&T) with private sector CEOs on 12 November 2011 in Mumbai, the
Department of Science & Technology has decided to constitute a "Joint
Committee of Industry and Government for stimulating private sector
investment into R&D". The composition of the Joint Committee is as under:
1. Dr. T Ramasami
Secretary
Department of Science & Technology
New Delhi
Co-chairman
2. Mr. B Muthuraman
President, CII
Vice Chairman, Tata Steel Limited
Chairman, Tata International Limited
Co-Chairman
3. Mr. S Gopalakrishnan
Vice President, CII
Executive Chairman,
Infosys Technologies Limited
Member
2.
Member
5. Mr.Hari S Bhartia
Co-Chairman & MD
Jubilant Life Sciences Ltd, Noida
Member
Member
7. Dr.Naushad Forbes
Director Forbes Marshall Pvt. Ltd., Pune
Member
Member
Co-Member Secretary
Co-Member Secretary
Annexure - II
This paper is compiled from OECD Science, Technology & Industry Outlook 2010
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The Nation's economic development (GDP per capita) and its journey
towards Innovation driven economies (currently 35 nations in this bracket
having GDP per capita of more than 17,000 USD) has been largely dictated by
the outputs of nations' robust Science, Technology & Innovation (STI)
ecosystem.
45
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46
One of the key enablers of a country's strong STI ecosystem is improving the
industry's competencies and enhancing incentives for Business R&D.
Increasing public support to R&D: Despite the slowdown in economic
growth and the resulting fall in tax revenue, government investments in R&D
have outpaced outlays in other areas. Government investments or spending
and tax cuts, taken together, have represented on average more than 3% of
GDP in the OECD area and up to 5% of GDP in the United States and Korea.
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
7%
4%
6%
23%
77%
68%
65%
9%
2%
30%
52%
45%
68%
7%
Japan
28%
29%
32%
38%
Germany
USA
Uk
France
India
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48
Fostering business R&D and innovation: Business enterprises are the main
source of innovation. They play a primary role in funding and performing R&D
in most countries and, more than ever, governments seek to increase
business investment in R&D and innovation. Global competition has led
countries to seek to boost the innovative capacity of the business sector. In
the EU, another catalyst has been the EU's 3% R&D spending target, which is
to be achieved primarily by increasing business expenditures on R&D (BERD)
to 2% of GDP. The intensity of BERD indicates the financial effort devoted by
the business sector to advance research. Japan and Sweden, for example,
have high BERD and patenting intensities. The shares of the services sector
and SMEs in BERD tend to mirror the structure of business R&D systems and
the relative contribution of non-manufacturing and SMEs to R&D
performance. Triadic patenting is an indicator of the ability of innovation
systems to generate new inventions that may be exploited globally. In
addition to framework conditions such as competition policy and access to
capital markets, a broad range of direct policy instruments, such as block
grants or competition based schemes, are used to stimulate business R&D
and innovation. Increasingly, many direct support R&D schemes are being
oriented or targeted to strategic sectors/technologies in order to foster
competitiveness but also to help firms in their specialization strategies. Soft
support, such as assistance in firm creation, counselling and
entrepreneurship measures, is also being used to complement direct R&D
support and to encourage risk-taking attitudes. While the general tax system
is used to foster investment in innovation by firms, specific R&D tax
incentives remain important in many economies, even if their design and
scope continues to evolve. Finally, many governments increasingly look to
use public procurement as a way to accelerate the diffusion of innovative
products or services in the business sector while meeting public demand for
goods and services. It is clear that direct support to business innovation, in
the form of competitive grants or subsidiszed and guaranteed loans, remains
important and has increased in some countries, especially for key industrial
sectors such as renewable energy, advanced manufacturing, ICTs and health.
However, the balance between merit-based and block instruments varies
tat
dS
e
t
i
Un
es
re
Ko
e
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m
d
en
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nc
ark
an
do
an
ed
rl a
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rm
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it
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i te
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Ne
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nd
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0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
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fixed base for incremental credits, carry forward of unused R&D tax credits,
tax credit refund mechanisms) add to the great variety of fiscal schemes. In
addition to the three major types of schemes, the Belgian and Dutch systems
represent a fourth category, as tax incentives in those countries aim at
lowering the cost of researchers either by diminishing wage tax and social
contributions or just the taxes on wages. While tax credits for R&D are
particularly widespread in many countries, where over 80% of public support
to business R&D is provided in the form of fiscal incentives, in countries like
the United States (through competitive R&D contracts), direct support
remains the main vehicle for public funding of business R&D. The wider issue
of how many firms take part in public support schemes for innovation (as
opposed to R&D) is not well documented. It is estimated that between onetenth and one-third of innovating firms participate in public support
programmes for innovation, with large firms receiving support more
frequently than SMEs. Although some countries do not offer any tax
incentives for R&D or innovation, R&D tax subsidies have become more
generous over the decade to 2008 in many countries.
50
Support for R&D and innovation in SMEs and start-ups: Although large firms
tend to introduce more "novel" innovations than SMEs, which tend instead
to be adopters, SMEs form the bulk of businesses and play a key role in
knowledge diffusion. Their contribution is more significant in marketing or
organizational innovation than in technological innovation. SMEs typically
have more limited access to finance than large firms and fewer resources for
generating and stocking knowledge. The credit crunch caused by the crisis
has raised serious concerns about their capacity to remain innovative.
Consequently, many countries have developed specific policy instruments to
foster innovation among SMEs. Direct financial support to small firms is used
to subsidize R&D, finance technology investments, and help them develop
human capital or access knowledge-intensive services. Innovation vouchers
aim to encourage and help SMEs to access and use knowledge from the
higher education and research sectors. At the same time, innovation
vouchers help firms to formalize their knowledge needs and allow
knowledge institutions to identify business demand and make public
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52
research hubs that host public labs, leading research universities and
innovative firms. The broadband penetration rate reflects how widespread
are high-speed networks that serve as a platform supporting innovation.
Broadband has become the leading delivery system for a wide range of
content and has dramatically changed personal and business practices. The
share of innovative firms engaged in collaboration and the degree of
collaboration on research publications provide direct measures of
collaboration in industry and in science. Virtually all countries give high
priority to policies aiming to improve the physical STI infrastructure and to
link public research to industry and society. In fact, the development of STI
platforms and infrastructures ranks as a top priority for Canada and Japan,
where collaboration in industry for the former and in both industry and
science for the latter, are weaker than in many other countries. Finland and
Sweden seem to show the best performance in terms of STI infrastructure.
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IPRs and knowledge diffusion: Appropriate IPR regimes and practices are
necessary to secure returns on investments in innovation and to encourage
knowledge sharing. A key issue for policy is finding a balance between rights
to control use of an invention via IPR and the diffusion of knowledge about
the invention (through licensing, publication, open networks, etc.). Getting
the balance "right" is the key goal of the knowledge networks and markets
that are emerging as a means to trade and exchange knowledge within more
open networked systems of innovation. Although few internationally
comparable data are available at this stage, three indicators may reflect the
emergence and spread of knowledge networks and markets, or at least the
parts of these that focus on patent development and exchange: i) the
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ranks high among STI policy priorities; it ranks lower in Austria, the
Netherlands and the United States, countries that at the same time are open
and internationalized. Three indicators reflect the internationalization of STI
and the extent to which a country may access international knowledge: i)
foreign direct investment as a percentage of GDP, ii) the share of
international students in tertiary enrolment; and iii) the percentage of patent
applications filed under the Patent Cooperation Treaty (PCT) with coinventors located abroad. The intensity of FDI inflows reflects the degree to
which a country may benefit from knowledge spillovers and additional R&D
investment from multinationals. The presence of many international
students suggests the contribution of foreign talent to research and the
building of connections with international university networks. The share of
PCT patents with foreign co-inventors is a direct measure of international
cooperation in research. Linking domestic firms to foreign sources of
knowledge, attracting knowledge intensive businesses and foreign highly
skilled workers, providing opportunities for inward and outward
international mobility are key aims of policies to adjust to and benefit from
globalization.
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with partners in Finland. Fin Node is already operating in China, Japan, Russia
and the United States. Germany has implemented international advertising
campaigns (e.g. South Korea Pilot Measure) under the umbrella campaign
"Research in Germany" to facilitate the initiation of R&D co-operation with
new partners abroad. Canada is reforming its system of international
taxation to facilitate investment, cut red tape and streamline the compliance
process associated with the taxation of cross-border activity. Support for the
internationalization of SMEs is also emphasized in strategies to improve
attractiveness. Sweden has set up public cost support offices to help SMEs in
strategic sectors, such as biotechnology, forestry and transport. In 2009, The
Swedish government also launched a pilot programme, VINN EXPORT, to
support SMEs financially to develop their innovation capacity with partners
or customers on export markets.
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Ensuring that education delivers the right mix of skills: Mathematics and
science proficiency used to be considered the foundation of a knowledgebased and innovation-driven society. However, recent developments and the
growing importance given to non-technological innovation have stressed
the need for complementary skills, including entrepreneurial capacities and
"soft" skills. Some countries have emphasized reinforcing mathematics and
science education. Improving teaching has been a first axis of policy action.
The United States has introduced various programmes to improve teaching
in mathematics (e.g. Race to the Top), to build local communities of support
around teachers and develop civic participation in bringing discovery-based
science experiences to students in grades K-12 (e.g. National Lab Day), and to
Improving the supply of skills for innovation: Higher education systems are
the main source of HRST, together with immigration and job-to-job mobility.
Accordingly, many countries give a high or medium high priority to improving
education for innovation. Four indicators can reflect the capacity of national
education systems to supply skills for innovation: i) total public and private
expenditures on education, as a percentage of GDP; ii) the percentage of new
university graduates in science and engineering; iii) the graduation rate at the
doctoral level and iv) female participation in doctoral studies. The intensity of
education expenditures measures the proportion of a nation's wealth that is
invested in educational institutions and shows the priority a country gives to
education in terms of its overall resource allocation. The percentage of
university graduates in science and engineering indicates the country's
potential to absorb, develop and diffuse knowledge, on the one hand, and to
supply the labour market with scientists and engineers, on the other. The
graduation rate at the doctoral level shows the country's capacity to provide
students with the highest education level and train them specifically to
conduct research and contribute to knowledge diffusion. Finally the female
participation rate in doctoral studies reflects the gender balance in doctoral
programmes and early research career paths.
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