How do you assess the government’s efforts to support innovation in Brazil?
We have seen significant progress in terms of innovation-supporting policies in the last 10 years or so. For example, bills were passed that support companies seeking to innovate. These include the Innovation Act 2004 and the Good Act 2005. Since 2011 we have had the Inova Empresa Plan, which aims to enhance coordination among government agencies. The Plan includes programs and instruments, such as credit, subventions and grants, for high-priority sectors.
Given this progress, what explains the low innovation levels we still see in Brazilian companies?
We saw improvement in some important indicators leading up to the global financial crisis. For example, the ratio of R&D spending to GDP increased significantly between 2005 and 2008. But our improvements weren’t enough to close the gap between us and innovation leaders, because others made equally fast or even faster progress.
Since the crisis, unfortunately, the situation in Brazil has worsened. Among companies in industries with high technology intensity, R&D spending increased from 1.89 percent of their revenue in 2008 to 2.28 percentin 2011. Among companies in sectors we classify as having medium-to-high technology intensity, the number went from 1.13 percent to 1.27 percent. But participation of technology-intensive sectors in our so-called industrial transformation value, which is a proxy for added value in the manufacturing and extractive industries, dropped from 6.8 percent to 5.7 percent over that same period. This offsets the overall positive impact of the efforts made by the highly technological sectors. Meanwhile, manufacturing’s share of Brazil’s GDP has shrunk considerably since the crisis.
We have more innovation credit and more innovation-friendly policies, yet our innovation gauges are not showing significant improvement. What is missing?
From the innovation-policy perspective, we may need to sharpen our focus. Innovation investment is expensive and risky, and we can’t offer an enormous amount of support to all sectors. But we can’t forget the wider issues stemming from our institutional and regulatory environment, as well as our excessive bureaucracy. These affect the economy overall. For example, the time required for an importing company to gain access to goods arriving at ports matters to Brazil’s entire economy, but for innovation, it is crucial. And the time required to obtain a patent in Brazil has to decrease.
You mentioned the drop in manufacturing’s share of Brazil’s GDP. Do you believe the economy is moving in the wrong direction as far as innovation is concerned?
I don’t mean to say that you can’t innovate in all sectors, but we have faced some challenges. For example, the commodity supercycle benefited Brazil’s economy, and its end presents clear difficulties. But in terms of innovation, the fact that some sectors that have grown the most are commodity-related is not ideal. It has led to a change in our productive structure that no innovation policy can offset. The efficiency of our agribusiness and mining sectors has further contributed to the situation.
Do you see a contradiction between the government’s innovation efforts and Brazil’s trade protectionism?
Yes, to an extent. Imposing trade barriers isn’t helpful. You may have as much support for innovation as you want, but, if there is no competition, companies have little incentive to innovate. So proinnovation and protectionist policies don’t point in the same direction.
The government has often been accused of focusing industrial and innovation policies excessively on large companies. For example, tax rebates included in the Good Act are accessible only to large companies. Would you agree with that criticism? Does this undermine the innovation environment for smaller companies, including startups?
I don’t agree with that criticism. Clearly, small companies are very important, but they need support in the form of different policies and mechanisms. And I think we have those mechanisms in place. Innovation subventions are a good example. That said, we shouldn’t neglect the importance of large companies. They contribute 80 percent of R&D investment in Brazil, so no industrial or innovation policy can ignore them. They can infuse dynamism into the economy, because as they grow, they bring with them their supply chains, which benefits small companies too. This is not to say that our industrial policy is perfect. But I wouldn’t say it focuses excessively on large companies. Rather, it focuses too much on traditional sectors, rather than investing in new ones.
Our research suggests that insufficient collaboration between different actors in innovation ecosystems is undermining Brazil’s innovativeness. What are your thoughts about that?
I am more prepared to discuss the lack of collaboration between academia and other research organizations and the corporate world – because it is an area I know better. And I agree with you. I think collaboration has increased a bit but remains far below what it should and could be. There are two main reasons for that. One, most of our main research institutions, including universities, are public; that is, state-owned. This is not a bad thing in itself, but it leads to bureaucracy that must be overcome to establish partnerships with private-sector companies. For example, there are constraints on academic researchers’ ability to develop joint projects with companies and get paid for them or to use a company’s resources in a public lab. Researchers have to solve problems such as how to buy equipment using money contributed by a private company.
Two, our labs focus much more on educating people than on conducting cutting-edge research. Of course, educating people is important, but we need both. We have many labs in engineering departments in universities where one academic is working with two or three students. Our research system needs more higher profile institutions such as Embrapa (the Brazilian Corporation of Agricultural Research), Fiocruz (the Oswaldo Cruz Foundation, a leading R&D center focusing on biomedical sciences) and ITA (the Aeronautics Institute of Technology). Having more institutions like these could help improve relations between the academic and corporate worlds in Brazil.
You have extensively researched what Brazil could do to be more innovative and productive. While economic structures vary across countries, what lessons could we learn from other countries and apply here?
There are many lessons. At Ipea, we have studied policies in the United States, Europe and China at the request of the Ministry for Science, Technology and Innovation. Many of these countries have clearly defined foci for their policies. Before identifying priority areas, they build roadmaps based on prospective studies of areas where they could gain a competitive advantage. Then there is the point we have just discussed about large institutions. China has more than 100 large labs, all linked to the Chinese Academy of Sciences. Each has a clearly defined focus. The US takes a similar approach, with the government providing large institutions, such as the National Institutes of Health (NIH), with significant budgets. Each NIH institute has a specific focus, such as cancer, ophthalmology or aging.
Thank you very much for sharing your views.
It has been a pleasure.
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