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In search of the lost time

Anpei gathers specialists together to get to know R&D investment strategies

LAURABEATRIZWhile the federal government is seeking support in the National Congress to approve, before the end of this year, the Law on Innovation, through which it intends to encourage investments from the private sector in research and development (R&D), countries like South Korea, Canada and Spain are already putting on their books the results of implementing policies that support innovation. The distance that separates Brazil from the countries that at least two decades ago have been betting heavily on corporate R&D to guarantee competitiveness in the international market was made clear during the 2nd Conference of the National Association for Research, Development and Engineering of Innovating Companies (Anpei), held in São Paulo on June 19th and 20th.

In spite of using different models, these countries have in common the fact that they have adopted a systemic vision of innovation, through which the government, researchers and businessmen have a clear view of their role as players for development. In South Korea, for example, the work of the government was decisive for the expanding the participation of corporations in investments for innovation, from the 70’s onwards. At the moment, the development centers operate under the command of the country’s private sector, according to Seunghyun Son, who represents the Korea Industrial Technology Association (Koita), the institution responsible for coordinating the collaboration between industry and the government. Koita, he says, has registered an amazing growth of R&D centers in the country over the last 20 years. “In 1979, when the institution was created, we had 43 research centers; at the end of 2002, we will reach over 10,000”, Son reveals.

The collaboration formula of Koita, which comprises around 4,500 companies, is based upon six pillars: industrial technology support, international cooperation, education and training, spurring R&D centers, besides drawing policies, information and research. “Koita promotes joint projects with the government and is responsible for the system feedback, supplying – through the surveys with the companies, the answers that government needs to spur its development policy”, explained Son.

To give an idea of the success of the policy adopted by the South Korean government, you only have to look at the figures: in 1980, the participation of public expenditure in investments in R&D was in the order of 80%, and industry’s share was 20%. By 1990, the situation had gone the other way round, and industry today takes on some 75% of the investments, against 25% from the government. Government and industry, together, inject US$ 20 billion a year into R&D, which puts Korea in sixth place amongst innovating countries from the Asiatic continent.

It is worth stressing that the US$ 4 billion that comes out of the official coffers on the way to the development centers accounts for no less than 47% of the national budget. The result of this wager can also be measured by the growth in the number of patents in Korea: over the last four years, the number of registrations multiplied practically fivefold, leaping from 485 in 1998 to something around 2,300, forecast for this year.

Innovation as a system
Another nation that planned its technological development was Canada. “In our country, innovation is not just a process, it’s a system”, pointed out Karin Keyes Endemann, the director of the international relations office of the National Research Council of Canada (NRC). Based on technology clusters, the system that she refers to gives priority to regional community ventures, with a focus on small and medium enterprises (SMEs), which in Canada, just as in Brazil, are the absolute majority. According to Karin, there are 260 councils in the country to provide support for the SMEs.

The essential ingredients for the Canadian proposal are qualification for R&D, the knowledge generated in the universities, and the continuous efforts in education and training. “However, there is no chance of success if the leaders of the communities are not involved in the process”, she pondered. The technology clusters have now been in existence for 15 years in Canada, but the results only started to appear in the last three years. There is no room for shortsighted ventures, explained Karin. “We are betting on the companies that are willing to devote time before getting profits.”

In the Canadian model, the scientists are encouraged to take technology to the market. For example, they get paid for six months and training in negotiation and in managing venture capital. The main clusters in Canada are focused on the areas of biotechnology (Saskatoon), pharmaceuticals (Biopharmaceutical), oceanic engineering (New Atlantic), nanotechnology (Alberta), information technology (ICT) and life sciences.

Knowledge clusters
The Basque Country, which was represented at the event by Monica Moso, also adopts the cluster strategy to encourage investments, although with the cooperation aimed at the production of knowledge. According to Monica, from Cluster Conocimiento, an association that has 172 members, this model follows the structure of having the participation of various protagonists, who establish links and create the conditions for the practice of innovation to be set up. “As knowledge lies in people, we have to be more participative”, Monica summed up. In 1990, she says, the Basque government hired “for a small fortune”, the consultant Michael Porter, who did a detailed analysis of the degree of competitiveness of the country and defined groupings where investments would be more fertile.

According to Monica, Porter’s suggestion was to put into effect vertical and horizontal cooperation geographically focused and giving priority to the following sectors: automobiles, energy, telecommunications, special steels, paper, aeronautics, environment and domestic appliances. The vertical model – between sectors – has not yet been implemented, but the horizontal one – in the value chain – is already a reality in the Basque Country, currently totaling 11 clusters. “We choose companies that are assessed by universities and that are instruments for dissemination and training”, she stressed.

At the beginning of the 80’s, investments in R&D in the Basque Country were insignificant, and,as the lecturer recalled, there was also no critical mass in academic circles, nor support for research in the universities. The policy for innovation that made the development centers spring up was possible, in Monica’s assessment, when the government started to be made up of non-professional politicians – or coming from industry. From then until now, the government’s investment in R&D has been multiplied by 25: it went from 0.07% in 1979 to 1.8% in 2002. Monica pointed out that, in the same period, the country also registered significant advances in the area of education, forming the critical mass that was lacking, to provide a basis for innovation.

Incentive for exports
To recover lost time, Brazil needs to give priority to ventures that are focused on the development of business, adding value in the productive chain, by means of investments in technological innovation, in the assessment of economist Luciano Coutinho, from the State University of Campinas (Unicamp). “Commodities with low added value are not going to solve the problem”, he explains. He gives the example of China, which, just like Brazil, used to account for 1% of exports in the world scenario between 1973 and 1983, and had quadrupled its share by 2000. “In the meantime, the weight of Brazilian exports in the international market fell to 0.9% in 2000”, he compared. The quest for a large scale surplus in the trade balance will only be effective, says the economists, if the source for giving incentives for exports and for replacing imports lies in the connection with a more consistent technological policy, aimed at the more dynamic products in the market.

The example he gave was that between 1980 and 1998, while the world’s exports grew on average 8.4% a year, the 20 products from the most dynamic sectors of international trade, which are those that are connected with R&D, grew, on average, 12.9%. The growth in exports of semiconductors in the period, however, was even greater, reaching the mark of 16.3%.

In his assessment, there is a lack of clarity, on the part of the Brazilian government, in the adoption of a system of incentives for the private sector. According to him, interest rates last year consumed about R$ 130 billion in new debt and another R$ 40 billion in fiscal debt. “There is nothing to prevent Brazil from solving its problems, except for our own ability for putting together a coherent policy”.

A risky bet
For the Ministry of Science and Technology, the core responsibility for the effort to innovate is in the hands of the businessmen. According to Minister Ronaldo Sardenberg – who, together with Hermann Wever, a former president of Siemens in Brazil and a member of FAPESP’s board, received the Anpei Award for Technological Merit – companies should seek out international partnerships to coordinate efforts and investments for achieving their objectives.

A good example of this partnership in the private sector is Votorantim Ventures, a US$ 300 million venture capital fund controlled by the Votorantim group, which has strategic alliances with international venture capital funds. Votorantim Ventures invests in promising, but high risk, companies, like Allelyx, which works in the area of biotechnology and has the objective of creating products that increase productivity in agricultural crops. “Our projects take from seven to nine years to mature”, said Fernando Reinach, a director of Votorantim Ventures. “The best ideas are just ideas”, he pointed out, stressing the strategic role ofthe angel investor.

Since 1999, when it changed the focus for its work, the Brazilian Micro and Small Business Support Service (Sebrae) has also been working to endow Brazil with venture capital funds. And it now participates with R$ 48.5 million in about ten funds, with an asset value of roughly R$ 162 million. Sérgio Moreira, the director-president of Sebrae at the national level, stressed the need for creating a favorable climate for small and medium enterprises. According to him, of the almost 4 million Brazilian companies, 99% are SMEs that account for 20% of the Gross Domestic Product (GDP) and have a 12% share in the total of exports.

Those taking part in the event recognized the efforts of the federal government to encourage investments in innovation, highlighting the lines of credit – of up to R$ 150,000 – of the Innovate project of the Financier of Studies and Projects (Finep). They are also laying their bets on the Law on Innovation, the draft for which is now ready to be forwarding to the Congress to be voted. “The results achieved also indicate that more has to be done, and, in this respect, the international scene gives us important indications”, said Minister Sardenberg. “We recognize that we are faced by a challenge that we cannot get round: to make the national efforts in science, technology and innovation more robust, so that on the horizon of a decade we may be able to meet the target of including Brazil amongst the nations that are advanced in this area.”.

The primacy of ethics and well-being

“One of the most challenging talks in all our lives.” That was how the former president of the Siemens group in Brazil, Hermann Wever, defined the presentation by the English futurologist Patrick Dixon, the author of the book Futurewise: Six Faces of Global Change, whose cover brings the following challenge: “Either we take hold of the future or the future will take hold of us.” Founder of Global Change (, Dixon gripped the attention of the participants of the conference with his fine speaking and curious examples of scientific innovations under way in the world.

The speed with which the future is being constructed was one of the aspects most touched on. According to him, knowledge is doubling every five or ten years, and intellectual capital is losing half of its value every two years in some industries. “Events like September 11th and the fraud in the balance sheet of companies like Enron are multiplying rapidly and end up generating a world confidence crisis”, he added.

In the next decade, he said, corporations will have to learn to deal with the six faces of reality, so as not to lose control of the future. To represent them, Dixon used a cube as an example. On each of the six faces, he wrote a word: Fast, Urban, Tribal, Universal, Radical and Ethical. These six words, according to Dixon, are divided into two groups: the fast, urban and universal faces (where the companies are), and the tribal, ethical and radical faces (where people are). In a world that changes constantly and rapidly, he argued, the important thing is to discover what the impact will be of the future changes in people’s behavior.

Dixon also stated that transformations will increasing have to pass through the scrutiny of ethics and well-being. “I rarely see an executive director in love with giving profit to the shareholders. Why? Because the rules of the game say that if he does not meet his targets, his head will roll”. The drive for research and innovation, he said, will come from the awareness that the data we have in our hands will change the fate of many human beings and improve the image of those who believed in them.