Innovation partnerships for development along green value chains

Growth and development success stories are often linked to new technological waves and innovation success. Green technologies emerge as a new technology category in which innovation quality in Emerging and Developing Economies (EMDE) - even when excluding China - is relatively high when measured via the value of knowledge spillovers they generate. This suggests that further R&D investment in developing country green-tech could be growth-enhancing. How could this be funded? We show that the highest-impact developing-country innovations are produced in collaborations between developing-country innovators and firms or innovators in High-Income Countries (HIC). Indeed, such collaborations, while amounting to only about 2% of HIC innovations, account for nearly half of all EMDE innovations. We also find that more diversified firms, with R&D staff from both HIC and EMDE, generate more knowledge spillovers in both EMDE and HIC. We suggest a model of innovation where the likelihood of a successful innovation is enhanced by more diverse but complementary knowledge stocks. Our results suggest that observed diversification is likely well below optimal levels and could be enhanced by policies such as tax breaks for R&D in EMDE or co-investments by development banks.