Smart specialization: opportunities and tools for iterative learning
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Transcript of Smart specialization: opportunities and tools for iterative learning
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Development Impact Evaluation Initiative
Smart Investment for Smart Specialization
Warsaw, June 27, 2012
Smart specialization: opportunities and tools for iterative learning
Paulo Correa Lead Economist, World Bank
Arianna Legovini Head, Development Impact Evaluation Initiative (DIME), World Bank
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Objectives of presentation
Provide motivation for the use of iterative/experimental learning in innovation strategies
Develop a framework for identifying bottlenecks and market failures to justify interventions
Highlight how the use of impact evaluations can maximize R&D investment impact through rigorous measurement and learning
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Background
Europe 2020: future of EC Cohesion Policy 2014-2020 dedicated to objectives of smart, sustainable and inclusive growth
Thematic concentration on research and innovation to maximize the impact of investment of structural funds
Research and innovation strategies for smart specialization (RIS3) to ensure effective implementation
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Information and implications
Discovery through
experimentation
Risk
leve
l for
pol
icy m
aker
s
Enabling specializati
on
Unleash latent
comparative
advantage
Modernization
HIGH
MED
LOW
NO INFO PARTIAL INFO FULL INFO
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Developing your RIS3: Where to specialize?
Where market information is lacking we may not know ex ante where to specialize
Policies targeting sectors/products not desirable due to incomplete and asymmetric information for policymakers
Ex ante decision-making process will likely be biased towards "incumbents"
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Developing your RIS3:Finding one’s niche, together
Create enabling environment for efficient market selection Promote entrepreneurship across the board Successful companies will constitute the new
specialization of the country/region (self-discovery)
Develop a flexible strategy and integrate iterative learning Focus on measurable intermediate goals Identify bottlenecks and market failures Experiment, learn, adapt
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Developing a flexible RIS3
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---Determine measurable goals
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---Identify bottlenecks and market failures
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---Experiment, learn, adapt
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------
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---Determine measurable goals
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---Identify bottlenecks and market failures
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---Experiment, learn, adapt
Developing a flexible RIS3
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Measurable goals
Overall objective Increase the impact of R&D expenditure
on national/regional developmentMeasurable goals (examples):
Increase private R&D and innovation investment
Accelerate R&D commercialization Improve technology adoption by SMEs Research excellence
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Developing a flexible RIS3---------------------
Determine measurable goals
---------------------
Identify bottlenecks and market failures
---------------------
Experiment, learn, adapt
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Identifying bottlenecks
Constraints to increasing private R&D and innovation investment Credit? Incentives? IP?
Constraints to improving technology adoption by SMEs Awareness? Skills? Critical mass?
Constraints to research excellence Skilled labor? Partnerships/coordination?
Let’s consider acceleration of R&D in more detail…
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Basic
research
Proof of concept
Early stage
technology
development
Product
developme
nt
Product
marketing
Identify the weakest links in the chain to target, test, and learn from
R&D
Commercialization
Strengthening the innovation chain
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Why would we assume this?
Strategy /instruments
• Early stage financing (ESF)
Goal
• R&D Commercialization
Our tendency is to start with the interventions and make assumptions about how they will help meet our goals
But, what is the basis for this assumption? Is the intervention justified?
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Who?
Goal
• Increase R&D Commercialization
Target group
• Private sector start ups?
• Public research?• Established firms?
Start with the objective and identify who the bottleneck lies with
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Why?Question/Goal
• Increase R&D Commercialization
Target group
• Public research
Market Failure
• Lack of early stage financing?• Poor intellectual property
rights?• Lack of mentoring services?• Coordination failure?
Identify why there is a need for public intervention (the market failure)
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Why?Question/Goal
• Increase R&D Commercialization
Target group
• Public research
Market failure
• Lack of early stage financing
Market failure critical assessment
• Why?• Intangible collateral• High (uninsured)
risk• Asymmetric
information
Identify why there is a need for public intervention (the market failure)
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What?Question/Goal
• Increase R&D Commercialization
Target group
• Public research
Market Failure
• Lack of early stage financing
Market failure critical assessment
• Intangible collateral
• Asymmetric information
What intervention can overcome this market failure?
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And experimentQuestion/Goal
• Increase R&D Commercialization
Target group
• Public research
Market failure critical assessment
• Intangible collateral
• Asymmetric information
Intervention design
• Early stage financing
With alternative instruments to learn and adapt
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An iterative RIS3 framework: Actionable and evidence-based
Question/Goal
• Selection/picking
• R&D promotion
• Commercialization
• …
Target group
• Entrepreneurs• Researchers /
academics• Public/private
Institutions• Venture
capitalists• Angel investors• Banks• …Market failure
critical assessment
• Eg. lack of credit: • Why?• Intangible
collateral• High
(uninsured) risk
• Asymmetric information
• …
Intervention design
• Matching grant• Tax break• Scholarships• Investment climate
reforms• Networking events• Academic
incentives (financial and non-financial)
• Guaranteed loans
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Bringing it back to measurable goals
Goal Bottleneck Instruments Measure of success
Incentivizing R&D expenditure
FinancingIncentives
Alternative credit linesMatching grants
# firms engaged in innovation; proportion of spend on R&D
Accelerate R&D commercialization
Business skills (academia)Early Stage Financing
Entrepreneurial trainingAngel investors
Licensing of spin off companies; patents
Improve technology adoption by SMEs
AwarenessSkills
Information campaignsTraining Programs
Take up rates of targeted technologies;
Research Excellence
Retention of skilled labor forceCoordination / collaboration
Non-financial incentive schemesWorkshops / international conferences
Academic qualifications; Quality of publication output; Publication collaborations
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Developing a flexible RIS3
---------------------
Determine measurable goals
---------------------
Identify bottlenecks and market failures
---------------------
Experiment, learn, adapt
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A practical guide to real time impact evaluation and experimentation Identify bottlenecks to determine
possible interventions to be testedPut down hypotheses for the
bottlenecksBut how can we rigorously test which
interventions work best?
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Monitoring vs. impact evaluation
Monitoring•Collects data on treatment groups to:•Track performance over time•Tell us whether we’re moving in the right direction
•Describes what is happening, but not why or whether this is because of our intervention
Impact Evaluation
•Assigns intervention to treatment and control groups to:•Measure counterfactual: what would have happened?•Establish causal link between intervention and outcome: if-then
•So we can measure impact of policy and compare instruments and pick better to improve policy over time
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Why impact evaluation?
Public investment to focus on changes not levels Targeting areas that would have done just as well
even without public support misses the point Public funds to be used to catalyze growth or
improvements that would not have occurred through market forces alone
So, just seeing improvements related to investments is not enough
We need to know what would have happened if the support had not been provided
This can improve public resource allocation
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Treatmentgroup
Before After
Treatmentgroup
According to monitoring, the amount of R&D diminished: the intervention had a negative effect?
Use the right tools to get the right answers
Let’s look at R&D investment before and after the intervention.
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Treatmentgroup
Before After
Treatmentgroup
Control group
Impact of the intervention
Control group
Recession
According to evaluation, the intervention had a positive effect: without it, R&D reduction would have been larger!
Use the right tools to get the right answers
Let’s look at R&D investment before and after the intervention.
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Treatment 1group
Before After
Treatment 1group
Control group
Compare impact
Control group
Treatment 2 has a larger effect
Use them to learn (compare alternatives)
Compare the impact of different mechanisms before and after the intervention.
Treatment 2group
Treatment 2group
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How can impact evaluation help?We are fairly clear on the WHAT is
needed but not on the HOW to provide it
Use what we already know to improve policy design IE evidence points to behavioral
mechanisms that are common across sectors—need to operationalize evidence in the specific context
Identify and learn how to make it work Careful critical thinking on what you
need to know to take better decisions in the future
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People …
forget, remind them text messaging
procrastinate, give them deadlines announce one time calls for matching grants
shy away from choosing, provide default options default sign up in training, incentive schemes
say they will but won’t, pre-commit them precommitment for investments
Use what we know from behavioral finance
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401(k) Default increase take up
Before After40%45%50%55%60%65%70%75%80%85%90%
ControlTreatment
[Madrian and Shea, 2001]
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Deadlines increase matching grant applications
Week 1
Week 2
Week 3
Week 4
Week 5
Week 6
Week 7
Week 8
0
10
20
30
40
50
60
70
Applications
DEA
DLI
NE
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Public recognition may be more powerful than financial incentives
Contro
l
Small
finan
cial
Large
finan
cial
Non-fin
ancia
l468
10121416
Sales
[Ashraf et al., 2011]
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Precommitment increases investment & technology adoption
Farmers offered precommitment savings accounts increase: Land under cultivation by 10% Agricultural inputs by 26% Crop output by 22%
Brune, Gine, Golberg, Yang (2011)
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And think about what else we need to learn
What information and incentives will facilitate academia-private sector partnerships?
What level of technical assistance is needed to turn start ups into viable businesses?
Is finance more important than technical support?
And test it…
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Testing what?
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Promoting public-private sector collaborationPublic funding for R&D
Provided to private sector
Conditional on public sector partnership
Unconditional
Provided to public research organizations
Conditional on private sector partnership
Unconditional
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Researchers’ incentives to commercialize
Incentive and information to researchers
Mentoring and networking
Intensive support
General information
No information
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Maximizing quality of technological solution
Public funding Global competition (innoCentive)
National competition
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Mimicking angel investor: technical support
Grantee assistance
Training on development and marketing
Pseudo-angel investor support
Angel investor hired
Angel invest portion of funds/own time
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Mimicking venture investor: addressing incomplete information
Grant for proof of concept
Early stage tech dev by selection committee (70% match)
Prototype by selection committee (70% match)
Prototype by market test (ranking by highest private match)
Early stage tech dev by market test (ranking by highest private match)
Prototype by market test (ranking by highest private match)
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Train and design
evaluation of programs at
scale
Large research teams
Networks of policy-makers
develop communities of practice
Regular IE thematic events
Experiments to test possible
solutions
generate local knowledge
Find and adopt solution
Identify regularities
Use networks to discuss
results
Stimulate policy-makers
to consider adoption
expand global policy adoption
DIME support
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Task
Starting from your goals, identify Implementation and behavioral issues Possible instruments and mechanisms 3-4 ideas about possible things to test in
your strategy