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Innovation and technology policy (ITP) for catching up: a three phase life cycle framework for industrializing economies

Listed author(s):
  • Avnimelech, Gil
  • Teubal, Morris
Registered author(s):

    This paper outlines a dynamic, medium/long term Innovation and Technology Policy framework for industrializing economies directed to simulate innovation and to contribute to the eventual creation of high impact innovative entrepreneurial clusters. The paper is predicated on the assumption that while cluster creation policies are possible in many contexts they requires adoption of a System Evolutionary (S/E) perspective to Innovation and Technology Policy. Given the current 'entrepreneurial phase' of the ICT Revolution, support of 'Innovative SMEs' should be one of the axes of an overall strategy of development for a large group of industrializing economies. The three phase policy model proposed here starts with direct Government support, including Horizontal support to Business Sector R&D/Innovation and/or to innovative Small and Medium Sized Enterprise or Start Ups (Phase 1); and culminates with implementation of Targeted or other policies in support of Venture Capital (VC)/ Private Equity (PE) and possibly of other industries. Between these two central policy thrusts an intermediate phase 2 would be implemented with the objective of reinforcing innovation and creating other favorable conditions, including favourable 'demand' conditions and enhanced policy capabilities, for a successful transition to Phase 3. The model is a generic model which allows for different variants reflecting different country contexts, although, throughout, it will emphasize the importance of direct Business Sector support mechanisms at least during Phases 1 and 2. The structure of the policy portfolio will depend on country characteristics and specific institutions; and its changes over time will also reflect in part differences in the policy objectives from phase to phase. As it stands the framework is neither 'formal' nor 'appreciative theory' that is theory which closely follows the facts. This is the result of the paucity of data and the impossibility of undertaking at this stage a cross-country comparative analysis of policy cycles. Still the model as it stands can provide useful pointers to policymakers in a variety of contexts.

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    File URL: http://repositorio.cepal.org/handle/11362/4862
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    Paper provided by Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL) in its series Estudios y Perspectivas – Oficina de la CEPAL en Buenos Aires with number 36.

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    Date of creation: Feb 2007
    Handle: RePEc:ecr:col030:4862
    Note: Includes bibliography
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    1. Paul Gompers & Josh Lerner, 2003. "Short-Term America Revisited? Boom and Bust in the Venture Capital Industry and the Impact on Innovation," NBER Chapters,in: Innovation Policy and the Economy, Volume 3, pages 1-28 National Bureau of Economic Research, Inc.
    2. Paul Gompers & Josh Lerner, 2001. "The Venture Capital Revolution," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 145-168, Spring.
    3. Avnimelech, Gil & Teubal, Morris, 2006. "Creating venture capital industries that co-evolve with high tech: Insights from an extended industry life cycle perspective of the Israeli experience," Research Policy, Elsevier, vol. 35(10), pages 1477-1498, December.
    4. Florida, Richard L. & Kenney, Martin, 1988. "Venture capital-financed innovation and technological change in the USA," Research Policy, Elsevier, vol. 17(3), pages 119-137, June.
    5. Teubal, Morris & Andersen, Esben, 2000. "Enterprise Restructuring and Embeddedness: A Policy and Systems Perspective," Industrial and Corporate Change, Oxford University Press, vol. 9(1), pages 87-111, March.
    6. Bernard S. Black & Ronald J. Gilson, 1999. "Does Venture Capital Require An Active Stock Market?," Journal of Applied Corporate Finance, Morgan Stanley, vol. 11(4), pages 36-48.
    7. Raymond Vernon, 1966. "International Investment and International Trade in the Product Cycle," The Quarterly Journal of Economics, Oxford University Press, vol. 80(2), pages 190-207.
    8. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
    9. Westphal, Larry E, 1990. "Industrial Policy in an Export-Propelled Economy: Lessons from South Korea's Experience," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 41-59, Summer.
    10. Dahlman, Carl J. & Ross-Larson, Bruce & Westphal, Larry E., 1987. "Managing technological development: Lessons from the newly industrializing countries," World Development, Elsevier, vol. 15(6), pages 759-775, June.
    11. Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-583, June.
    12. Dossani, Rafiq & Kenney, Martin, 2002. "Creating an Environment for Venture Capital in India," World Development, Elsevier, vol. 30(2), pages 227-253, February.
    13. Bell, Martin & Ross-Larson, Bruce & Westphal, Larry E., 1984. "Assessing the performance of infant industries," Journal of Development Economics, Elsevier, vol. 16(1-2), pages 101-128.
    14. Sapienza, Harry J. & Manigart, Sophie & Vermeir, Wim, 1996. "Venture capitalist governance and value added in four countries," Journal of Business Venturing, Elsevier, vol. 11(6), pages 439-469, November.
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