Brazil.innovationreport

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this conerence was the second o three sessions dedicated to the question oinnovation in Brazil convened by the Brazil Institute and the program onScience Technology, America and the Global Economy (STAGE) o theWoodrow Wilson Center. It brought together top researchers, governmentocials, and business leaders to analyze the countrys current eorts and

uture prospects or developing a comprehensive and advanced nationalinnovation system. Panelists discussed the critical role businesses play inthe ever changing process o innovation and assessed dierent strategiesavailable to governments seeking to promote innovation rom both adomestic and global perspective.

Iai i Bai: Pbi Piisa Bsiss Sagis

BrazIl InsTITuTe andthe Program on scIence,

Technology, amerIca, and The gloBal economyMarch 2008

Written byaln Wgh

Pga Assisa,

Bai Isi


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BrazIl InsTITuTe and The Program on scIenc

need or innovationmaking it a central pil-lar or any public policy aimed at economic

development and industrialization.Pacheco contrasted the role o contemporaryinnovation policies with the industrial policiesadopted shortly ater World War II. Whereasindustrial policies in the post-war period wereprimarily geared towards developing large state-owned companies in so-called strategic indus-tries and protecting domestic production romoreign competition, the globalized nature otodays international economy makes the crat-ing o innovation policies extremely complex.

Gone are the days when governments cansimply engineer policies that target specictypes o innovation; technological and scienticadvances, which are critical components o sus-tainable economic growth, are now primarilydriven by market demand. Yet, while rms arethe principal engines o innovation and policy-

tHE cHaLLENGE OF iNNOvatiON

Director o the Brazil Institute Paulo Soteroopened the discussion by highlighting thecomplexity o developing cohesive innovationpolicies. Future steps in building Brazils inno-vation system will be aected by developinginnovation systems in China and India as wellas by developments in the OECD countries.Decisions by governments to increase theirinvestments in research and development,

improve their innovation systems or stimulatepublic-private partnerships can be guidepostsand opportunities as well as challenges orBrazil. As more and more countries developor improve their innovation systems and theresearch community becomes more global, itis less and less possible or a single governmentto impose lessons upon others.

ci di

Carlos Amrico Pacheco, assistant secretary ordevelopment o the state o So Paulo, con-textualized the debate within the historicalrole innovation has played in human develop-ment and discussed how transormations in theinternational economy have shaped nationsapproach to innovation-oriented public poli-cies. He explained that innovation is not anew phenomenon; technological progres-sion and the development o new tools havebeen central to the evolution o mankind.

What is new about the modern-day ocuson innovation is the scale o and speed withwhich technical knowledge and scienticadvances have taken place. Globalization hasincreased the competitiveness o countriesand corporations integrated into the worldeconomy, which, in turn, has sharpened the

GloBAlIzAtIon hASIncreASed the

comPetItIveneSS

of countrIeS And

corPorAtIonS Inte-

GrAted Into the

world economy,

ShArPenInG the need

for InnovAtIon.


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chnology, and The gloBal economy

ship, as well as rms exposure to risk and accessto creditall o which are critical componentso an industrys innovative capacity.

Nonetheless, observed Pacheco, to trulysucceed as an international competitor thecomplexity o the entire innovation para-digm requires governments to adopt a moreholistic approach to public policy. That meansincreasing capital and labor mobility, pub-lic and private sector cooperation, as well asprovisions o public goods like technologicalinrastructure. It also means providing directincentives or businesses (especially medium

and small businesses) to enhance innovationand encourage risk-takers (angel investors,venture capitalists, etc.) to commit seed-capitalto start-up companies; establishing tech-parksand business incubator programs; stimulatingcooperation between businesses and universi-ties; and promoting the commercialization o

making is still grounded in economic consid-erations, the best players in the internationalarena are those that have developed a nationalsystem o innovation where the increasednumber o actorscompanies, governmentalinstitutions and research centersfuidly inter-act within a cohesive network.

Itt nti stti

Within this network, Pacheco elaborated, gov-ernment institutionsand particularly a coun-trys macro-regulatory rameworkplay a pivotalrole. Take, or example, the central role the U.S.

Federal Drug Administration (FDA) plays in thepharmaceutical industry. Not only is the FDAscommitment to protect intellectual property (IP)crucial or the development o new knowledgeand products, he stressed, but the agency alsohelps shape the nature o rms in the market,the incentives and disincentives or entrepreneur-

FiGurE 1. r&D Spendng s Peenge of GDP(2003)

USA

Sweden

Japan

Germany

England

France

Korea

Canada

Brazil

GDP

0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%

Source: UNESCO


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manuacturing sector is more imperative thanever. Pacheco emphasized that or the coun-try to succeedand become a greater orce inthe globalized economyit must employ inte-grated innovation policies in a way that exploitsits comparative advantages and ample naturalresource base.

T r Kw

Carlos Henrique Brito Cruz, scientic direc-

tor o the Fundao de Amparo Pesquisa doEstado de So Paulo (FAPESPthe So PauloResearch Foundation), provided general com-ments about the process o innovation in Braziland around the world. He discussed the con-tinued discrepancy between Brazils impressiveability to generate knowledge and its ailure to

intellectual property. A coordinated nationalstrategy that integrates these dierent policiesinto one cohesive ramework should thereorebe a top-priority or the Brazilian government,argued Pacheco.

Pacheco highlighted that Brazils approachto innovation has produced mixed results: onthe one hand the countrys system is under-developed and ragile, on the other hand, thecountry has managed to make signicant prog-ress in this eld. One particularly telling sign

o such progress is that the term innovation isnow an explicit item on the governmentsagenda. Prior to 2001, he remarked, govern-ment agencies responsible or advancing sci-entic knowledge only considered the issueso science and technology; now, the ocusor these agencies is on science, technologyand innovation. Trade organizations as well asbusiness groups and associations have gonethrough a similarly transormational process:

their lobbying eorts have led to scal policyreorms and adoption o new laws aimed atspurring innovation. Moreover, Brazil has a seto companies with proven innovative capac-ity, he emphasized. Despite Brazils ragileindustrial base or innovation, a 2005 study bythe Instituto Brasileiro de Geografa e Estatstica(IBGE, Brazilian Institute or Geography andStatistics) showed that nearly 33 percent oBrazilian rms are considered innovative,meaning that within a given calendar year they

have developed a new product or service.With the rise o Asia and China as the worlds

manuacturing hubs and the pressures o anappreciating real (Brazils national currency),the need or Brazil to scale-up its level o pro-duction, develop higher levels o value-addedproduction, and reinvent the trajectory o its

whIle unIverSItIeSPlAy A PIvotAl role

In the InnovAtIon

ProceSS By

ServInG AS centerS

of reSeArch And

AnAlySIS, they Serve

A much GreAter

functIon In the SyS-

tem AS ProducerS

of humAn cAPItAl.


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new ideas and scientic advancement, as wellas a more inormed consumer pool interestedand able to purchase new products.

Moreover, Brito Cruz stressed the centralplayers in an innovative economy are not uni-versities, but rather rms. Brazil has had a legacyo neglecting the importance o businesses in thisprocess; up until 1999, the government assumedthat universities were adequate substitutes topick up the slack in research and development(R&D) not carried out by the private sector.

As a result, universities dominated the coun-trys public discourse on innovation-orientedpoliciesskewing policies in their avor.

Ti Kw it Pt

To elucidate his point regarding the importanceo the private sector, Brito Cruz contrasted the

translate these ideas into tangible products andservices. Brito Cruz concurred with Pachecoshistorical analysis o the role o technologicaldevelopment, adding that the economic ocuson innovation was not widely established untilater the communications revolution o the late1990s, driven by the internet.

Brito Cruz criticized the tendency in Brazilor discussions on innovation policies to onlyocus on the part played by universities. Whileuniversities play a pivotal role in the innova-

tion process by serving as centers o researchand analysis, he explained, they serve a muchgreater unction in the system as produc-ers o human capital. Individuals with higherdegrees o education provide the country witha dynamic workorce that is better able to use,adapt and co-opt knowledge generated by

FiGurE 2. insonl Dsbon of r&D a

USA

Japan

Germany

England

France

Korea

Canada

Brazil

Scientists (%)

0 20 40 60 80

Industry Government University

Source: Brazil

and the Knowled

Economy, Brito/

FAPESP 2005/06


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it lags ar behind other competing countriesin the number o patents developed. And pat-ents, argued Brito Cruz, are better measures oa nations ability to translate innovative capacityinto concrete knowledge-based goods. TakeSpain or example, a country with signicantlyewer PhD graduates. Whereas the numbero patents registered by So Paulo in the U.S.Patent and Trade Oce has grown slowly since1982, reaching a peak o approximately 75 in2004, Spain in the same year registered over

300 patents, or more than 6 times the numbero patents it registered in 1982.

Brito Cruz cited two important actors toexplain this discrepancy. First, Spanish compa-nies invest more money in R&D than Brazilianones. Second, ar more Spanish scientists areemployed in the private sector than in Brazil(about 60 percent o Spains researchers areemployed by rms, in Brazil less than 23 per-cent are). Research has shown that both actors

are positively correlated with successul inno-vation strategies. Companies that invest morein R&D produce more patents; the more sci-entists a country employs in private rms, themore patents the country registers, explainedBrito Cruz. To urther underscore the central-ity o businesses in the production o knowl-edge-based goods, he cited trends in the pat-enting process in the United States. Despite thepopular notion that universities are the dr iverso research and discovery, in 2003, universities

accounted or only our percent o registeredU.S. patents.

Brito Cruz stressed that it is imperative orBrazil to adopt appropriate policies that recog-nize the leading position rms occupy in theprocess o innovation. Among other initiatives,the Innovation Lawsubmitted to Congress

Brazilian experience with that o Latin Americaand other comparable and important countries,ocusing particularly on Spain. He noted thatin the state o So Paulothe ocal point o his

research because the state is responsible or over55 percent o the scientic knowledge pro-duced in Brazilmore scientic publications(the measure used to benchmark scienticknowledge) are produced than in any othercountry in Latin America. Mexico, the regionssecond highest producer, published about 4,500articles in 2004, which is roughly 1,000 lessthan So Paulo. Furthermore, the state boastsan impressive number o PhD graduates: theUniversity o So Paulo (USP) and Unicamp

graduated 2,041 and 873 PhD candidates in2004, respectively. The University o Caliorniaat Berkeley, the next highest contender, gradu-ated 769 PhDs in the same year.1

Yet, despite the states high level o scienticknowledge (an important measure o a coun-trys innovative capacity), Brito Cruz observed,

Government muStrecoGnIze thAt

BuSIneSS IS the

PrImAry drIver of

InnovAtIon And

PolIcIeS Should

Be ShAPed Around

thIS reAlIty.


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trys innovation system by increasing indus-tries condence in the governments strategiccommitment to develop a avorable nationalenvironment or innovationa much neededassurance to mitigate the business risks associ-ated with investments in innovation.

GLOBaL PErSPEctivES ON iNNOvatiON

Moderator o the conerences rst panel andExecutive Director o Prospectiva InternationalConsulting Ricardo Sennes stressed that innova-tion is key to a countrys international strategy.Unortunately, he remarked, there is a growinggap between Brazils domestic policy agendaand its conduct in the international arena. On

by President Fernando Henrique Cardoso in2002 and signed into law two years later byPresident Lulawas a particularly importantstep in the right direction. The law, whichincreased academic IP rights, encouragesgreater university-industry joint R&D ven-tures and stimulates industrial R&D by provid-ing tax incentives, subventions and subsidizedloans. It also established a critical precedent,continuity, which is arguably more important

than the substance o the policy. The act thatthe law was drated and submitted under FHC,then signed by President Lula, signies howseriously the government takes this issue andlends greater condence to the governmentslong-term strategy. Further institutionalizingthese governmental policies will spur the coun-

FiGurE 3. Pen Flngs pe $mllon r&D Ependes 2004

Korean Rep.

Japan

Russian Fed.

China

United States

UK

Argentina

Brazil

Sweden

Chile

India

Mexico

R&D Spending ($ Millions)

0 1 2 3 4 5

Source:

WIPO 2006


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complex. Ensuring that those involved in theinnovation process can trust the integrity opolicymakers and policies, as well as the com-petency o institutions, certainly requires con-tinuity o policy. Moreover, Merrill added thatthe reason policymakers might overemphasizethe role o government and academia at theexpense o the private sector, is that both enti-ties are easier to manage and deal with, andimplementing policiesregardless o theireectivenesshas political benets.

Merrill ocused his discussion on the evolu-tion o the innovation system in the UnitedStates. Changes in the United States refectbroader, underlying patterns that are shiting theway innovation works, he said. Merrill under-scored the United States leading position oninnovation. Quoting George Mason UniversityProessor Christopher Hill and speaker at theBrazil Institutes rst conerence on innovationin June 2007, Merrill stated that or over a hal

century (U.S.) rms have mastered wave aterwave o new technologies, rom aerospace andelectronics to pharmaceuticals and nanotech-nology. These successes were built on a strongoundation o new knowledge(and) havebeneted rom the establishment o a highlysupportive national innovation system. Merrilladded that the United States has airly consis-tently topped indices that measure countriesinnovative capacity, citing its rst-place rank-ing in the recently released World Economic

Forums 2007-2008 Competitiveness Index, asyet another example.

What makes the U.S. national innova-tion system (NIS) so successul? Part o theexplanation, Merrill noted, can be ound inthe various, complimentary elements o thecountrys NIS. Specically, the role institu-

the domestic ront, Brazil appears to be makinggreat eorts to encourage innovation throughrigorous IP protection and an integrated net-work o institutions, laws and norms. Yet, inthe international arena, the country seems todisregard many o these same principles, pre-erring protectionism and reactive diplomacy.

siti Ptt i u.s. Pii

Stephen Merrill, executive director o the UnitedStates National Academy o Sciences Board

on Science, Technology, and Economic Policy(STEP), refected on Br ito Cruz and Pachecosanalysis o innovation and concurred that,indeed, constructing, engineering, or creat-ing incentives or appropriate policies is very

recoGnIzInG

PAtternS In PolIcy

ShIftS In the unIted

StAteS, euroPe

And PArtS of ASIA

cAn helP BrAzIlIAn

PolIcymAkerS And

StAkeholderSdeveloP the moSt

effectIve nAtIonAl

InnovAtIon StrAteGy.


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Japans manuacturing prowess. Today, Indiaand China loom large in the minds o policy-makers who ear the balance o technologicaland scientic power may be tilting East. As aresult o a series o reports2 and the perceivedthreat rom the East, policymakers passedlegislation authorizing a variety o measures:increasing public R&D; providing more gen-erous tax incentives or corporate R&D; andimproving both basic and higher education inscience, technology, engineering and math.

Merrill also analyzed other issues drivingchange within the innovation process romthe perspective o the rm. According to hisanalysis, the United States is increasingly seen asa high-cost R&D location with comparativelyless unique R&D capital and human resources.Furthermore, the globalization o investmentand growing use o outsourcing as a necessarybusiness practice, has broadened the pool oknowledge available outside the United States

and decreased the attractiveness o investing inAmerica. Perhaps more signicantly, he said,rms consider innovation to be less reliant onnatural sciences and engineering, and more onsocial science, art and new business practices.

c i t Ivti Pi

As a result o the evolving nature o innova-tion and increased oreign-based competition,several new topics have entered the nationaldebate. Now there is pressure or the govern-

ment to improve measurement o innovationperormance, support investment in intan-

gible assets in addition to R&D, and reormintellectual property policy eatures o the regu-latory process. Merrill stressed how these issuesexempliy the changes underlying the innova-tion process. Regarding regulatory reorm, he

tions (public, non-prot and commercial)play in perorming R&D; the availability ocapital and sophistication o nancial actorsthat invest in technology-based start-ups; the

robust intellectual property regime and strictenorcement o IP rights; business-riendlytax policies as well as the compatibility otechnical and regulatory standards. Anotherimportant actor to consider, Merrill stressed,is that while U.S. innovation institutionsand policies are in continual fux or reasonstangential to innovation concerns, rom timeto time they are brought under review sys-tematically [sic] in response to perceived or-eign challenges. This was certainly the case

with the aggressive development o Americasspace program and expanded ederal supporto graduate educationa direct response toRussias successul launch o Sputnik in 1957.In 1980, the Innovation Domestic PolicyReview initiated by President Jimmy Carterwas a result o the perceived threat posed by

InnovAtIon IS StIfledBy overly ActIve

BureAucrAcIeS And

reGulAtory reGImeS

whIch exPlIcItly

encourAGe the uSe

of certAIn technolo-

GIeS over otherS.


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ei git: T r Ii ciKent Hughes, director o the Wilson CentersSTAGE program, discussed India and Chinasgrowing infuence in the eld o innovationand noted that the trajectories o both coun-tries will aect policies and strategies o devel-oped and developing countries alike. Hughesexplained that globalization has changed thestructure o the international economy, bringingabout opportunities or emerging economiesnot only to be niche producers o technology-

based goods but also generators o knowledge.As the process o research and developmenthas gone global, both India and Chinas strongbase o skilled technicians, engineers and scien-tists make the countries attractive locations ororeign direct investment (FDI) and regionalR&D centers or global companies.

This changing dynamic has led both coun-tries to develop ambitious innovation strate-gies, he observed. Every year, China is esti-

mated to graduate over 600,000 engineersand skilled technicians with post-secondaryschool education. The country also plans onestablishing over 1,000 high-caliber researchuniversities. Chinas broader ocus on improv-ing education, especially higher education, hasbeen paying o; China currently ranks secondin the number o scientic papers published onthe issue o nanotechnology. India is aware thatnew, lower-cost competitors are bound to chipaway at its comparative advantagesshiting

low-cost call centers to other countriesandplan to scale-up production to compete in sec-tors with higher-value services and production.Aside rom improving the countrys educationsystem, Hughes added, India has placed greateremphasis on business schools and managingtechnology, hoping to build on its IT/business

alluded to comments made by Pacheco, andobserved that an overly active bureaucracy andregulatory regime which explicitly encour-age the use o certain technologies over othersgenerally stife innovation. A more successulapproach is to provide industries with specicbenchmarks that establish guiding standardsand norms but allow individual companies andmarket demand to determine which technolo-gies would most eciently yield the desiredpolicy result. A common example is setting a

minimum standard o miles per gallon that newcars must comply with in hopes o producingmore ecient vehicles.

On the issue o IP rights, he remarked, thereis a growing division concerning the mea-sures adopted over the past 25 years that havestrengthened and extended patent protectionand contention over what steps should nowbe taken to modiy that course. One interestgroupled by the sotware, computer services

and nance sectorsis lobbying or variousreorms which include an open-ended, post-patent challenge process; limiting damages orIP inringement to account or an inventionscontribution to a product; and limiting injunc-tions when inringements are ound. Anothercoalition, headed by the biopharmaceuticaland old-style manuacturing sectors, opposeseach o these measures. This division suggests

just how disruptive innovation politics andpolicy changes in the innovation system may

be. These changes also have implications oremerging economies like Brazil. Recognizingpatterns in these policy shits can help Brazilianpolicymakers and stakeholders develop themost eective national innovation strategy andhelp the country absorb the emerging charac-ter o innovation in the global economy.


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Whereas a standard investment to build acement actory is based on predictable and reli-able cost and prot estimates, venture capitalinvestments in innovative areas such as biotech-nology are characterized by uncertainty andvolatility. Considering the rigorous selectionprocess VC unds utilize to determine whichprojects to und, Reinach noted that investors

and stakeholders must have enough condencein the viability o capital investments in orderto be willing to absorb its inherent risks andcosts. The problem with innovation in Brazil isnot these inherent risks and costs associated withthe process o product development, but ratherthe added costs that result rom the countrys

services base and to expand and diversiy thecountrys productive capacity.

tHE BuSiNESS SiDE OF iNNOvatiON

Luiz Henrique Braido, proessor at the GetlioVargas Foundation and moderator o thepanel on business strategies, commented onthe increased attention the issue o innova-tion has received in the eld o economics. In

past decades, economists attempted to explainthe discrepancies in GDP across the world byocusing on the distribution and use o capitaland labor. Today, the notion o productivity hasarisen as a major explanation or this dispar-ity. Many studies indicate that as much as 50percent o the variation in household incomearound the world can be explained by the di-erence in use and availability o technology,he averred.

Vt cpit: spki Ivti

Fernando Reinach, executive director oVotorantim Novos Negcios (VNN VotorantimNew Ventures), assessed the cr itical role o ven-ture capital in the development o new prod-ucts and services. In order to understand hownew discoveries translate into tangible products,Reinach emphasized the need to better compre-hend the investment process required to nancesuch projects. Using VNNa risk-capital und

developed by the Votorantim Group to diver-siy its business portolioas a case study, hedescribed the process in clear economic terms:given the higher level o risks associated withventure capital (VC) unds, these unds needto generate much higher levels o return thantraditional capital investments.

GloBAlIzAtIonhAS chAnGed the

Structure of the

InternAtIonAl

economy; emerG-

InG economIeS thAt

uSed to only Be

nIche ProducerS of

technoloGy-BASed

GoodS Are now

AlSo GenerAtorS

of knowledGe.


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or Science and Technologys public nanc-ing company, Financiadora de Estudos e Projetos(FINEP Research and Projects Financing)and the Brazilian National Economic andSocial Development Bank (BNDES)itsinconsistent bureaucratic actions oten disad-vantage the very actors it seeks to support. Forexample, companies that develop revolution-ary products in industries with no substitutesare oten punished by regulatory agencies orbeing monopolistic. Reinach concluded that

these inconsistencies and contradictions serveto damage investors condence in the govern-ments commitment to promote innovationand discourages uture investments.

PHramacEuticaL iNNOvatiON iN BraZiL

Alexander Triebnigg, president o Novartis Brasil,evaluated the complex relationship between

the pharmaceutical industry and Brazil. Heemphasized the pharmaceutical industrysgrowing desire to expand operations in Braziland highlighted some important developments.In previous decades, the Brazilian pharmaceu-tical industry ocused primarily on its domes-tic market and specialized in the production ogeneric and replica drugs. Today, universities likeUnicamp, which has submitted over 475 patentrequests, and Brazilian companies Cristalia andAche are actively involved in developing new,

cutting-edge drugsan important changethat will help the country balance its negativecommercial balance or drugs.

Nonetheless, Triebnigg recognized that thepharmaceutical industry aces signicant obsta-cles to growth in Brazil. Bureaucratic bottle-necks in the approval o clinical tr ial protocols

weak institutional ramework and inadequatelegal enorcement. Nearly six years ater makingits rst investment in the biotechnology sector,the biggest challenge VNNs biotech venturesaces is patent inringement. Reinach explainedthat at this point in the maturity o the invest-ment, the companys considerations should beocused on bringing new products to market,not earing the legitimacy o its patents.

Reinach lamented that institutionally, Brazilhas yet to develop a coherent consensus onhow innovation will be treated. While the gov-ernment has made eorts to decrease someo the risks associated with capital invest-ments by oering a series o incentivessuch as nancial credit through the Ministry

for BrAzIl to BooStInnovAtIon In the

PhArmAceutIcAl

InduStry the coun-

try muSt AGGreS-

SIvely modernIze ItS

InStItutIonS chArGed

wIth PromotInG

InnovAtIon And

StrenGthen IP lAwS

And PAtent rIGhtS.


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patent to produce a generic version o the drugEavirenzhas discouraged investment in thepharmaceutical industry. For Brazil to x someo these barriers, Triebnigg recommendedstrengthening IP laws and patents, and urgedthe country to more aggressively modernizeits institutions, such as the Brazilian NationalInstitute o Industrial Property (INDI), chargedwith promoting innovation.

Bt Bi PtiMaurcio Mendona, chie executive o theIndustrial Competitiveness Unit o the NationalConederation o Industries, analyzed the inter-section between business and Brazils nationalinnovation environment. He noted that Brazilhas taken steps to spur innovation by adopting

reduce Brazils competitiveness as a destinationor the development o clinical researchabottleneck that not only hurts prots but thecreation o new drugs as well. Furthermore,a continued public misperception about theprocess o research, discovery and innovationhas tainted the drug industry; many citizensand non-governmental organizations view themotives o drug companies with suspicion. Theissue o biopiracy is extremely problematic,

Triebnigg noted, as it has embroiled Novartisin a legal and political battle which preventedthe company rom investing in a researchacility in Brazil at that time. Also, the coun-trys shaky record on IP protectionin May2007 President Lula authorized a compulsorylicense or Brazil to use Mercks HIV/AIDS

FiGurE 4. the dsoe nd deelopen of new dg sepense, sk, nd e-onsng.

10.000 compounds are initially researched

1 new medicine produced

10 compounds reach clinical trials

1.000 compounds reach in vitrotesting

6-9 years

US$626 million

2-3 years

US$615 million

Pre-Clinical

Trials

Clinical

Phase 1

Clinical

Phase 2

Clinical

Phase 3

Registered

Patent

Source: PhRMA

and Tufts Center

the Study of Drug

Development 200


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and ees levied on businesses, poor labor rela-tions, limited availability o nancing, and thecomplexity o scal incentives provided by thegovernment and various other impedimentsto innovation. For rms to survive in thisharsh climate, he recommended they adopta long-term, strategic vision o innovation.This requires r igorous market analysis; manag-ing partnerships with other rms, universitiesand government research centers; and adopt-ing a business practice which benchmarks and

compares a companys perormance to that oits respective competitors.

Successul companies must be able to iden-tiy the economic and social demands o a mar-ket to better exploit its comparative advantages,argued Mauro Assano, executive manager oresearch or IBM Brasil. This process requiresrms to identiy which o three primary typeso innovationcontinuing innovation, disrup-tive innovation, revolutionary innovationwill

increase its competitive edge. Each type requiresa dierent strategy, he explained. Continuinginnovation improves upon an existing product;disruptive innovation creates a substitute good(usually at lower costs) with the aim o steal-ing market share rom an existing product; andrevolutionary innovation is the invention o anentirely new product. Deciding upon the appro-priate type o innovation will enable companiesto create a portolio o diverse potential invest-ments and identiy the most viable projects.

Sonia Tuccori, R&D manager or Natura dis-cussed the integral unction o R&D in theinnovation system. She explained that thenumber o new products launched by her com-pany is directly tied to the amount o R&D itperorms. In 2002, Natura launched 91 newproducts; in 2006, that number climbed to 225.

subvention, equalization measures and betterscal policies. Yet, the number o companiesthat operate in this innovation niche are stillthe ones that would do so regardless o thesepolicies. Mendona argued that part o thereason Brazil lags behind OECD membersand other leading emerging economies is its

historical decit o strong public policies;aborting the countrys nascent semi-conductorindustry severely hindered the growth o indus-tries producing technology-intensive goods.

Moreover, the countrys current economicenvironment is not conducive or large-scaleinnovation. Mendona cited the high tax-rate

the ProBlem wIthInnovAtIon In BrAzIl

IS not the rISkS And

coStS of Product

develoPment, But

rAther the Added

coStS ASSocIAted

wIth the countryS

weAk InStItu-

tIonAl frAmework

And Poor leGAl

enforcement.


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(ANPEI), assessed an oten overlooked com-ponent o innovation: competition. vilareerenced a recent study by MIT ProessorEdward Roberts that determined nearly 70 to80 percent o all cases o technological inno-vation are driven by market orces, or what istechnically termed market-pull. Consideringthis act, the government should thereoreocus its eorts not only on nancing inno-vation-based projects but on enhancing thecountrys international competitiveness by

adopting a more export-oriented businessstrategy and encouraging businesses to createstronger structural and managerial bases withinthe company. These internal mechanismswill allow companiesnot governmentstodetermine which technologies and productsoer the best chances to develop new marketsor products.

NOtES

1. All statistics cited by Carlos HenriqueBrito Cruz are the result o his origi-nal research at the Institute or ScienticInormation.

2. Two o the most infuential o thesereports are The National AcademiesCommittee on Science, Engineering, andPublic Policy publication Rising Abovethe Gathering Storm: Energizing and

Employing America or a Brighter EconomicFuture (2005) and the (U.S.) Council onCompetitiveness Innovate America: Thrivingin a World o Challenge and Change (2004).

Links to speakers presentations, related doc-uments, and statistics are available through oursite, www.wilsoncenter.org/brazil/innovation.

During this same period, the companys R&Dinvestments rose rom USD$16.5 million to$49.25 million. Tuccori noted that Naturasocus on innovation relies on human capi-tal and an integrated, comprehensive strategy.The company is dedicated to attracting themost talented employees: o its 210 researchers,51 percent have either a Masters degree or aPhD, 32 percent have a Bachelors degree, andthe remaining 17 percent are ormally trainedtechnicians. Naturas innovation strategy has

evolved with the changing demands o theglobal economy; whereas the company previ-ously relied on a closed-innovation systemwhere all new knowledge and technology wasdeveloped internally, it now ollows an open-sourced innovation system where it collabo-rates with other rms and universities in thedesign and development o R&D.

Srgio Risola, general coordinator or theUniversity o So Paulos TechnologyBased

Business Incubator Center (CIETEC), explainedhow CIETEC is a pioneering example o jointpublic and private innovation-oriented initia-tives. The Center houses over 128 dierent sci-ence-based companies with the aim o bringingtogether all o the players in the innovation pro-cess to generate knowledge and convert it intomarketable products that benet society. Risolaargued that business incubator centers serve asan ideal vehicle or entrepreneurs. They bringtogether leading experts and provide them with

the necessary resources, technical knowledgeand training that allows them to better managenancial resources and the development o newcompanies and products in an environmentthat promotes cross-pollination o ideas.

Olvio vila, executive director o NationalAssociation or R&D o Innovative Companies


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The Bzl inse was created out o the conviction that Brazil and the U.S.Brazilian rela-tionship deserve greater attention within the Washington policy community. Brazils populationsize, and economy, as well as its unique position as a regional leader and global player, justiy thi

attention. In keeping with the Centers mission to br idge the worlds o scholarship and policy-making, the Brazil Institute sponsors activities on a broad range o key policy issues designed tocreate a Brazil presence in Washington.

The Pog on Sene, tehnolog, ae, nd he Globl Eono (StaGE) studies theimpact o international trade, nance, and globalization on political and economic developmentin America and the World.

STAGE also ocuses on the growing importance o innovation, science, and technology policyin three complementary ways: exploring how technology can help achieve key national andglobal goals including health, energy security, and economic progress; assessing policy implica-tions o emerging technologies; and examining the building blocks o long-term economicgrowth including investment, lie-long learning, global engagement, and innovation.

WOODrOW WiLSON iNtErNatiONaL cENtEr FOr ScHOLarSThe Center is the living memorial o the United States o America to the nations twenty-eighthpresident, Woodrow Wilson. Congress established the Woodrow Wilson Center in 1968 as aninternational institute or advanced study, symbolizing and strengthening the ruitul relation-ship between the world o learning and the world o public aairs. The Center opened in 1970under its own board o trustees.

In all its activities the Woodrow Wilson Center is a nonprot, nonpartisan organization, sup-ported nancially by annual appropriations rom Congress, and by the contributions o ounda-tions, corporations, and individuals. Conclusions or opinions expressed in Center publicationsand programs are those o the authors and speakers and do not necessarily refect the views othe Center sta , ellows, trustees, advisory groups, or any individuals or organizations that providenancial support to the Center.

Lee H. Hamilton, President and Director

Board oF TrusTees

Joseph B. Gildenhorn, ChairDavid A. Metzner, Vice Chair

Pbi mb: James H. Billington, Librarian o Congress; Allen Weinstein, Archivist o theUnited States; Bruce Cole, Chair, National Endowment or the Humanities; Michael O. LeavittSecretary, U.S. Department o Health and Human Services; Condoleezza Rice, Secretary, U.SDepartment o State; Cristin Samper, Acting Secretary, Smithsonian Institution; MargaretSpellings, Secretary, U.S. Department o Education. Designated Appointee o the President romWithin the Federal Government: Tami L. Longaberger.

Pivt citi mb: Robin B. Cook, Bruce S. Gelb, Sander Gerber, Charles L. Glazer, SusanHutchison, Ignacio E. Sanchez

BrazIl InsTITuTe andthe Program on scIence,

Technology, amerIca, and The gloBal economy

the Bzl inse

Woodrow Wilson International

Center for Scholars

Plo Soeo, Director

aln Wgh, Program Assistant

One Woodrow Wilson Plaza

1300 Pennsylvania Avenue, NW

Washington, D.C. 20004-3027

Tel: 202.691.4087

Fax: 202.691.4076

[email protected]

www.wilsoncenter.org/brazil

the Pog on Sene,

tehnolog, ae, nd

he Globl Eono (StaGE)

Woodrow Wilson International

Center for Scholars

Ken Hghes, Director

Jqelne Nde, Program

Assistant

One Woodrow Wilson Plaza

1300 Pennsylvania Avenue, NW

Washington, D.C. 20004-3027

Tel: 202.691.4206

Fax: 202.691.4001

[email protected]

www.wilsoncenter.org/stage

Brazil.innovationreport

Documents

Transcript of Brazil.innovationreport