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Accident along the way

Research from the IBGE verifies that a contraction in the economy has limited technological advance in the country

Between 200 and 2003, technological innovation hardly advanced in the country, although the number of companies that carried out research and development (R&D) in a continuous form grew. During this period, the number of industries that invested in the development of new products and processes grew by 31.5% to 33.3% respectively, according to the companies consulted during the first and second reviews of the Industrial Research of Technological Innovation (Pintec), from the Brazilian Institute of Geography and Statistics (IBGE in the Portuguese acronym).

As well as registering a low level of innovation, the Pintec 2003 review – released at the end of June – credits this increase exclusively to small companies with between 10 and 49 employees who, during the interval of these three years, developed innovation ‘of imitative character’, at lower costs and with fewer risks. In the other company sectors, it was verified that there was a fall in spending on innovation.

“The economic contraction of 2003 considerably damaged the innovative capacity of companies in Brazil”, analyzes Carlos Henrique de Brito Cruz, FAPESP’s scientific director. In 2000, the first Pintec review mapped out innovation within a scenario of the expansion by 4.4% of the Gross National Product (GNP) and of an expansion of 4.8% in the industrial sector. Data from the second Pintec review was collected three years later, when the economy reflected the results of fiscal policies and monetary restrictions, a GNP growth of 0.5% and an industrial growth of 0.1%. Only in exports was there a favorable performance, pushed forward by exchange rate devaluation and by the fall in domestic demand.

“These were difficult years”, observes André Tosi Furtado, a professor at the Scientific and Technological Policy Department of the Geosciences Institute of the State University of Campinas (Unicamp). Almost half of the 28,000 innovative companies identified by Pintec said that they had had difficulties in making development projects materialize. In 2000 this percentage had been higher, at 54.7%. But, between 2000 and 2003 the main obstacles to innovation followed the same lines: higher costs, excessive economic risks, shortage of finance, lack of qualified personnel and of information concerning technology. The difference between the two research results is that in 2000 the difficulty of keeping up to the standards had occupied tenth place within company justifications and in 2003 that went on to occupy sixth place.

The negative economic scenario neutralized the incentive measures directed towards innovation. “There’s no point having stimulus policies when the behavior of the economy is unstable”, says professor Furtado. The data from the Pintec 2003 research reveals that  companies had assumed a more cautious position in relation to the modality of investment. Spending on innovation, which had represented 3.8% of industrial income during 2000, fell to 2.5% in 2003. The fall was even more accentuated in the spending on acquisitions of external knowledge; the purchasing of machinery and equipment; and finally new investments in industrial projects.

The exception was in a very small band of companies, those with between 10 and 49 employees, among which the level of innovation rose from 27% to 31%. In the evaluation of professor Furtado, they had been ‘obliged to adopt innovation in order to survive’. As they represented 79.7% of the companies researched in the Pintec 2003 review, these small companies strongly affected the national indicators. The professor emphasized that the level of innovation measured by Pintec is an indicator of technological diffusion. “In the overall picture there was greater adhesion by the small. But the large companies are those that are responsible for the greater investments in innovation.”

Good news
The good news from the Pintec 2003 research is that the number of companies that are carrying out research and development continuously grew from 42.9% in 2000 to 49.2% in 2003. This change has had repercussions on the statistics of personnel employed. In 2000, the IBGE verified that 31,400 people had been employed full time in the activities of R&D, whilst a further 32,900 occasionally took part in R&D. This proportion has now been inverted: 32,600 had been employed exclusively in the activity of R&D and only 19,400 had partially dedicated their time to this activity. The phenomenon was observed in all of the company categories.

The number of post-graduates and graduates also grew in the companies. In 2000, among the 41,500 people employed within R&D, 20,000 had a university degree. In 2003, the post-graduates and graduates represented 21,800 within a contingency of 38,500 people.

Even so, in the evaluation of Brito Cruz, the number of people in entrepreneurial R&D is still very small. “Unfortunately the Pintec review didn’t bring out an effectively relevant indicator, namely the number of pure researchers, which is smaller than the total number of people employed in R&D. This is a pity because it continues to be impossible to adequately compare the Brazilian situation with those of other countries. We only know that the number is less than 21,800”, says Brito, pointing out that in South Korea the number of researchers in companies is some 128,000, in the United States 800,000 and in Spain 20,000. “It’s interesting to note that, with this number of researchers in companies, Spain annually registers 440 patents with the United States Patents and Trademark Office (USPTO), while Brazil, with less than 21,800 researchers,  files about a little more than 100.

For Furtado, the growth in the number of people totally dedicated to R&D demonstrates that companies understood that the economic recession was due to a grouping of temporary factors. “Costs were cut, salaries fell and the companies kept their teams”, he analyzes. The companies that did not have a fixed team – and who maintained part time personnel in innovation – opted to relocate those employees into other functions.

Learning and diffusion
Another important indicator in the evaluation of the advance of entrepreneurial innovation is the source of information and cooperation relationships between innovative agencies. In the end, the strengthening of the interaction in the environment of the national innovation system plays a fundamental role in technological development: it facilitates the flow of information and promotes learning and the diffusion of new technologies.

The innovation strategy adopted by a company is reflected in the hierarchy of its information sources. During the two periods evaluated, the situation inside Brazilian companies changed little: the most cited sources still remain fixed in the internal areas of the company (62.7%), suppliers (59.1%), events and exhibitions (58.4%) and clients or competitors (53.4%). The acquisition of a license, patents and know-how are among the least mentioned. However, the importance of information technology networks in the search for information grew significantly – from 33.1% to 46%.

The number of companies that are operating in cooperation also reflects times of recession. The first Pintec review identified 2,500 companies participating in cooperative practices. In 2003 this number fell by at least half to around 1,000. In the grouping of innovative industries, the percentage of cooperating companies fell drastically from 11.0% to 3.8%. This percentage grew only among the very large, those employing 500 of more workers, who have a greater capacity to work within a network.

It is interesting to note that, in spite of these negative results, the companies placed universities and research institutions in a third place ranking of their preferred partners, behind only their suppliers and clients and consumers. “The Brazilian university already plays an important role in research and development”, observes Furtado.

Government support
In order to evaluate the impact of official incentive innovation programs and to understand the profile of companies that make use of public resources for R&D, the IBGE research questionnaire included questions concerning the application of financing, grants, amount of venture capital, among others. It was verified that, during the analyzed period, the percentage of companies that received government support grew from 16.9% to 18.7%. In 2003 these official incentives benefited close to 5,000 companies, at least one third of them with 500 or more employees. This directly proportional relationship between the size of the company and the use of incentives can be observed through all the types of programs and lines of financial support.

The lines of credit from the National Economic and Social Development Bank (BNDES), the Bank of Brazil and the Federal Caixa Economica, among others, for the purchase of machinery and equipment lead the ranking of the programs most in demand. They are used by 13.4% of small innovative companies and by 24.5% of the major companies. In second place come the resources offered by the Research Support Foundations (FAPs), the National Council for Scientific and Technological Development (CNPq), the Financier of Studies and Projects (Finep), among others. In third place they found the financing of research projects developed in a partnership between companies and universities, carried out by way of the sectorial funds. This support modality, nevertheless, is used only by 1.4% of innovative companies. This percentage, however, is greater than the 0.7% that benefit from fiscal incentives awarded for R&D. “This shows how the support instruments for R&D in companies are inefficient”, says Brito.