How small island states can create successful innovation policy

There is a common misconception that a country’s size and economic structure can stand in the way of any meaningful science and technology policy interventions. But our experience working in the Caribbean shows differently.

Distributed across the world – in the Caribbean, the Pacific, the Atlantic, the Indian Ocean and the South China Sea – small island developing states have unique cultures and geopolitical situations, but they share a number of specific challenges to their economic growth.

These often include a narrow production base, an undiversified economy and concentrated export and import markets, as well as a higher vulnerability to natural disasters and the impact of climate change. Such states often have limited R&D activity, fragmented national innovation systems and low tertiary education attainment.

But this doesn’t mean that economic competitiveness and diversification are out of reach. Well-constructed and implemented science, technology and innovation policy can stimulate growth, generate added value and create well-paid jobs. Achieving this, however, requires deliberate efforts to develop national innovation capabilities.

Policy Links has engaged in various projects in the Caribbean, in collaboration with the Inter-American Development Bank, supporting countries seeking to leverage science, technology and innovation policy as a source of more inclusive and sustainable development. Throughout, we found that the potential benefits of such polices are often underestimated, and that there remain a number of misconceptions about their feasibility.

Here are a few of the most common myths about innovation policy in small island developing states – and why they don’t need to be a barrier to innovation.

Myth #1: “Science, technology and innovation policy is too expensive. Small island states don’t have the economic capacity to invest in innovation.”

Innovation activities emerge out of complex interactions across the public and private sector, shaped by the institutional framework – policies, laws, norms and routines – that can enable or constrain innovation. Although small island developing states often have limited public resources, more can be done to improve governance structures related to research, innovation and business support among government ministries and agencies.

Establishing effective mechanisms to coordinate innovation activities under the influence of the public sector can significantly improve the creation, diffusion and adoption of new knowledge in the economy, as well as help optimise the use of available resources, without requiring a step change in investment.

The quality of connections between the different parts of an innovation system is a critical determinant of competitiveness. In this regard, smaller nations have an advantage – a smaller system is easier to coordinate, and raising awareness of the value of innovation among policymakers and firms is less onerous. It is also easier to ensure that all relevant parts of the system can be part of the design and implementation of national development goals.

In the last few decades, a growing number of developing countries have taken steps to address governance gaps and strengthen coordination. For example, Jamaica’s Science and Technology Policy (1990) aimed to create linkages among key innovation actors and led to the establishment of a national coordinating entity for science and technology, the National Commission on Science and Technology, which has contributed to noteworthy innovations across various sectors.

Similarly, our recent collaboration with Saint Lucia’s National Competitiveness and Productivity Council suggests a governance framework to implement its newly developed National Competitiveness Agenda to ensure traditional coordination barriers are overcome.

Myth #2: “It would be difficult for small states to compete with leading nations in scientific research.”

Small island developing states don’t necessarily have to compete against leading scientific countries – instead, they can benefit from a stock of knowledge that is internationally available and, to some extent, increasingly open.

An innovation system reaches beyond the process of scientific research and discovery, comprising three elements: knowledge creation, knowledge diffusion and knowledge adoption.

Knowledge creation is the research and development activities related to new technologies, tools and techniques. Knowledge diffusion is the development of network linkages, norms, and system-wide intelligence to facilitate efficient diffusion of knowledge. Knowledge adoption is the capability development activities related to accessing and applying new technological knowledge.

Building capabilities across these three dimensions needs to be understood as a gradual process. But owing to their size, the diffusion and adoption of best practices and technology across local firms represents an achievable target that could lead to meaningful productivity improvements in the short and medium term, independently of efforts to strengthen their scientific base.

It is difficult for firms to keep up with the pace of technological change, particularly SMEs focused on the day-to-day operations of their business. New approaches are required to improve and continually update local firms’ understanding of the business value arising from new technologies. Without this understanding, companies cannot take the first steps toward new technology adoption.

Furthermore, managerial and technical capability gaps hindering knowledge diffusion and adoption must be addressed. National science, technology and innovation policies could benefit from recognising the need to improve firms’ capabilities, their understanding of newly available and emerging technologies, and their potential business benefits. Information is also needed about possible implementation challenges, associated costs and sources of support, as a first step toward building viable business cases for investment in technology adoption.

Examples of a feasible approach focused on knowledge diffusion and adoption are technology extension programmes successfully used in industrialised countries to accelerate the pace at which small and medium sized companies ‘catch up’ with more advanced firms. These initiatives are finding their way to, for example, small Caribbean states through Compete Caribbean’s Technology Extension pilot programme.

Taking lessons from around the world and adapting them to the local context, this programme aims to create a regional system and build economies of scale by providing technical assistance grants to small- and medium-sized enterprises with high growth potential from thirteen Caribbean nations, with the hope of achieving substantial productivity growth in the near future.

Our recent collaboration with the Development Bank of Jamaica has led to the proposal of a similar domestic programme focused on digital technology adoption. A wide range of digital technologies are readily available in the market, and therefore small island nations do not need to reinvent the wheel and develop them from scratch. These offer great opportunities to boost firm-level productivity and capability development through technology adoption support.

Myth #3: “Science, technology and innovation initiatives from larger and more industrialised countries are not applicable to small island countries.”

While policy initiatives cannot simply be copied and transferred from one country to another, particularly when there are obvious differences in terms of innovation and industrial system structures and levels of maturity, they can still provide information on best practice with regards to effective design, implementation and operation.

The study of international experience offers an invaluable insight into what makes a successful science, technology and innovation programme and can be adapted to support the development of similar initiatives in smaller states, tailored to their specific scale and political, social and economic frameworks.

In particular, reviews of international policy initiatives and mechanisms are a useful approach to address capability and experience gaps often found in local teams responsible for the implementation of new programmes. These exercises can inform the design of new initiatives by capturing key characteristics of leading programmes, such as levels of funding, rationale/justification, operational rules, implementation bodies, performance metrics, programme duration, and governance frameworks, among others.

This is the idea behind the Caribbean Industrial Research Institute in Trinidad and Tobago, a globally recognised centre of excellence in industrial technology. Its membership in the World Association of Industrial and Technological Research Organisations provides it with access to the experience, technical know-how and breakthrough research of over 160 research and technology organisations from over 70 countries. This helps to inform its mission and adapt its services portfolio to the specific needs of local firms while keeping abreast of the latest knowledge and expertise.

Opportunities

In short, it is not only high-income countries with advanced research ecosystems that can implement meaningful interventions in science, technology and innovation policy. There are many low-cost interventions that can lead to significant change in any context, and many lessons from more industrialised countries that can be adapted and utilised in small island developing states.

At Policy Links, we work with governments to help them realise these opportunities in industrial innovation policy by providing new evidence, insights and tools based on the latest academic thinking and international best practice. We combine these with careful reviews of local contexts to identify practical policy options. Find out more about working with us.