Science and technology policies for development: A review of problems and issues

Science and Technology Policies for Development: A Review of Problems and Issues* FRANCISCO R. SAGASTI

INTRODUCTION

These notes present an overview of some issues involved in science and technology (S&T) policy formulation and implementation in Third World countries. They are based on observations made in the course of a five-year Learning process as part of the Science and Technology Policy Instruments (STPI) project, although they do not attempt to present or summarise the resuhs obtained by the ten country teams, the international coordination office, and the consultants participating in the project .I The STP~project focussed on the technology aspects of science and technology policy, and on industrial technology in particular. This perspective, introduced into the research as a way of limiting its scope, is reflected in the notes. The insufficiency and relative failure of industrialisation efforts of the Third World countries in the post-World War II period, as well as the new prominence that science and technology were gaining in the industrialised world, combined to focus the attention of Third World countries on science and technology policy problems. International agencies and experts also he&d to publicise and spread this concern. The initial manifestation of this concern was a preoccupation to compare the sciencg and technology (WTf capabilities and resources of highly ~nd~st~~~s~ and Third World countries in order to identify what was missing in the latter. Thus attention focussed on the need for a well-developed institutional infrastructure of research and development organisations, higher education centres, science support institutions, and even high-level policy-making bodies for science and technology. This was accompanied by a flurry of diagnostic studies aimed at describing the situation of science and technology in the Third World countries. *This paper first appeared in IFDA Dossier.4, February 1979, and is reproduced by kind permission of the Editor, International Foundation for Development Aiternatbes. Swimrland. The viewsexpressedaretlloseoTtheaothor and do not necxssarily represent those of the instirutions with which he is associated_ ’ For a full treatmen! of this subject see: Francisco RI Sagasti, Science rend Tk3motog.v .for Dmelo~menf: Main Compwuliw Reporf 01 he STPI Pmjecl, Ottawa, International Developmenr Research Centre, 1978; and Francisco R. Saeasti and Alberro Araoz, ~~e~~~#l~~jcQf e~~~~~~~e~~o~ rire SIT! Project, Ottawa, international Ikeiopment Research fenrre. 1976.

574

17 R. Sqasri

From these initial manifestations of the concern many policy recommendations emerged. Practically all of them were based on some ideal conception of what the science and technology ‘system’ should look like, adopting implicitly the situation in the industrialised nations as the model to follow. Missing institutions were identified. policies were suggested, and planning efforts were started, but usually neglecting differences in the specific contexts of underdevelopment, employing abstract models as guide to policy formulation, and paying attention only to the supply of scientific and technological knowledge. The common thread running throughout these recommendations was a rather naive and widely-shared belief on the effectiveness of government intervention to deveiop an indigenous scientific and technological base. This base would produce technology relevant to the needs of industry, which would be adopted by industrial firms as soon as it became available. The shortcomings of this approach soon became evident. Even in the cases where policies and government measures were successful in creating an infrastructure for science and technology, the linkages with industrial production were nowhere to be seen. Faced with a lack of demand for their services, research institutes, universities, and supporting organisations developed a logic of their own, paid lip service to the ‘relevant’ character of their activities, and continued demanding an increasing share of government allocations to finance their expansion. Partly as a reaction, and based on newly-available empirical studies which showed the abuses of industrial technology suppliers from the industrialised world (and the rransnational corporation in particular), there emerged a movement that blamed the lack of demand for local science and technology-and thus, the isolation of the scientific and technological structure from production - on the indiscriminate imports of foreign technology. Measures to regulate such imports were soon proposed in the Third World countries, a few institutions came into existence as a result, and this helped reduce the most visible abuses, or at least to make them less visible. The scant results observed after a decade show, in retrospect, the limitations and inadequacies of those policy recommendations. With very few exceptions, found in a handful of countries and in particular sectors, the situation has not altered significantly: science-related technologies generated in Third World countries are in no way close to accounting for even a modest share of the technology used in industrial production. In the early 1970s this promoted a concern to understand more deeply the nature of the S&T policy formulation and implementation process, relating them to specific contexts of underdevelopment and to the characteristics of different industrial branches. The STPI project was a research effort in this direction. THE CONTEXT

OF INDUSTRL4L. S&T POLICY

One of the premises of the research in STPI was that the specific characteristics of underdevelopment in a given country must be taken into account to understand properly the role of S&T in industrial development and the functioning of policy instruments. The dynamics of the historical evolution, particularly of industry and of science and education; the economic environment in which industrial growth takes place; and other factors of cultural, social and geographical nature, condition strongly the opportunities for technological developmenr in industry, and thus will exert an influence on the effectiveness of policy instruments.

Science and Technology Policiessfor Development: A Review OJProblems and Issues

575

Before the design and implementation of industrial S&T policies can proceed with a reasonable understanding of the local situation, there are a variety of contextual issues that need to be examined. A few will be highlighted using the STPI countries as examples. The origin and structure oj industry In most STPI countries industrialisation began almost in an involuntary way, prompted by external crisis (recession, wars) or by balance of payments difficulties that forced the country to restrict imports, particularly of consumer goods, and to start domestic production. This initial impulse was followed by deliberate protectionist policies to stimulate the growth of local industry, through measures such as tariffs, import licenses, foreign exchange controls, and import prohibitions. In some cases, the imposition of tariffs on imports was considered as a way of generating revenue for the government. With very few and recent exceptions, protectionist measures in STPI countries have not been regarded as devices to orient industrial growth, but rather as corrective mechanisms to be employed in situations of critical economic performance. This has conditioned th.e style and way of operating policy instruments to protect and stimulate the growth of industry, in the sense that they are seldom used to guide selectively the expansion of industrial activities. Consequently, they have paid even less attention to the possible growth of specific S&T capabilities for industry. Furthermore, the initial accumulation base for industrial growth came from the primary sector which, usually as a result of the country’s integration into the international division of labour as a commodity exporter, was able to generate an economic surplus and foreign exchange which were subsequently channeled towards industrial expansion. The main burden for the support of industry fell to agricultural activities, which provided foreign exchange for the imports of machinery and intermediate products for industry; provided cheap labour through periodic displacement of agricultural labourers to the cities; provided the agricultural products that were the basis of many industries (textiles, food processing); provided a market for mass-consumption industrial products; and also made hidden resource transfers to urban industrial centres, by providing low-priced food products for urban dwellers and buying highpriced industrial products from the cities. Some of these roles are still played by agriculture in STPI countries after many years of industrialisation. Other primary activities (oil production, minerals, fishing), oriented mainly towards exports, played similar roles to that of agricultural exports in the generation of foreign exchange. While agricultural activities have provided the initial accumulation basis for the industrialisation process in practically all countries, in the Third World it becomes necessary to pay attention to the relatively complacent attitude that would accompany a long history of relying on international transfers as a means of supporting industrial growth. As with most Third World countries, the consumer goods branches of industry- both durable and non-durable - were the first to emerge in the STPI countries. They grew under the stimulus of protectionist measures which restricted the import of consumer goods, but did not protect the local manufacture of capital goods and of industrial inputs. Incentives were given to import the machinery and equipment, as well as the raw materials and intermediate products required to produce consumer goods. Thus, as a result of historical processes and under the cumulative impact of government measures, the consumer goods branches of industry have developed more than the intermediate or capital goods branches. From the

576

F. R. Sapam

technological point of view, this has implied the massive importation of machinery and equipment which embody modern technology, while the additional elements of technological knowledge required to produce consumer goods have been imported in ‘disembodied’ form, primarily through licensing agreements and foreign technical assistance. As a result, the stimuli and demand pressure to build up technologically-compiex indigenous capital goods industries have been absent.

The pattern oj demand for technology In the process of import substitution industriaiisation, the structure of demand for industrial products had been established beforehand through the imports of consumer goods, with the consequent conditioning of tastes and habits. For this reason, when Iocai consumer goods industries were started, it became necessary to imitate as closely as possible the previously-imported products, which in turn required the import of technology, machinery and intermediate inputs. As time passed, and the incipient local scientific and technological base was not in a position to provide industry with the knowledge required to expand its activities (with the exception of routine testing, norms and standards, etc.), the ties with foreign suppliers of technology became stronger. The proven character of foreign technology, the fact that the foreign supplier could guarantee smooth production if his technology were used, and the risk aversion of Iocal entrepreneurs (including those in public enterprises), reinforced this reiiance on foreign sources of technology. There were also other mechanisms at work to make these ties even stronger. When financing for industrial projects was obtained from abroad -through bilateral government credits, multilateral agencies or private banks - the use of foreign technology, equipment, machinery, and engineering services usually became a condition for granting the loan, and there was little opportunity for iocai engineering or research groups to participate. The expansion of direct foreign investment, mainly through transnational corporations, made the ties between local industry in Third World countries and the suppliers of technology from the industrialised world even more strong. Foreign investment has provided a large share of the capital required for the expansion of some technologicahy advanced branches, and foreign loans (tied to foreign technology) have provided much of the capital for large investment projects, which are usually beyond the accumulation capacity of the Third World countries. On the other hand, the transfers of profits, interests, royalties, technical assistance fees, and so on, from local entrepreneurs and from subsidiaries to the headquarters of transnational corporations, have drained the industrial sector in Third World countries from a substantial portion of the limited surplus that their industry is capable of generating. The pressure of foreign technology supply has led to a passive attitude on the part of locai entrepreneurs, and few efforts have been made to diversify sources of supply, or to evaluate critically the foreign technology being offered. Needless to say, local S&Tcapabilities - when they existed- were left aside, leading to an extreme degree of dependence on foreign technology that makes local industry rather vulnerable. However, this high degree of dependence on foreign technology is not an exclusive characteristic of import substitution industriaiisation. When an export-oriented strategy is followed, it becomes necessary to import the technology required to manufacture goods for export, and also to acquire access to

Science and Technology

Policiesjor

Development:

A Review oj Problems

and Issues

577

the commercialisation channels that would allow placing the products in the markets of the industrialised countries. Endogenous science-related technology At the basis of these appreciations of the contextual factors conditioning the growth of technological capabilities lies the fact that industry in the Third World countries did not emerge out of an endogenous process of merging the gradual evolution of productive techniques with the findings obtained from scientific activities, in order to generate the science-related technologies used in modern industry. This was a process exclusive to a handful of western countries, and one which took a rather long time to mature. None of the Third World countries began to develop a cumulative basis of scientific activities until the second third of the 20th Century, and this development was mainly a reflection of the growth of science in the highly industrialised countries. Therefore, the lack of a historical tradition in science and technology-and the limited human, physical and financial resources of most Third World countries-makes it very difficult to develop a viable scientific and technological effort, uniess co-operative agreements are established. Neither has there been a widespread artisan, technical and engineering base, on a scale similar to that found in western industrialised countries several decades ago, that would permit the absorption and internalisation of scientific findings for the purpose of industrial production. The Third World countries are now in the process of acquiring this artisan, technical and engineering base (often through the evolution of traditional technologies) on the one hand, and the capacity to do modern science on the other, both of which are necessary to begin the drive towards endogenous science-related industry. This is a stage in which most of the presently industrialised countries were in the second half of the 29th Century and the first two decades of the 20th Century. Thus there is an inherent lag in the efforts to develop indigenous science-related industries in the Third World countries for the highly industrialised countries are now fully into the stage of systematic, organised and mass production of new technologies based on scientific findings. Not only is this process accelerating at a rapid pace in the industrialised world, but also the continuous transfer of the technologies which result from these activities is having a stunting effect on the development of an endogenous scientific and technological base in the Third World countries. Opportunities and limitations Faced with these conditions, what are the oppportunities and limitations for the development of industrial S&T capabilities in the Third World countries? As a preliminary step, it is necessary to dispel the illusion that the present unequal distribution of industrial and innovative capabilities between industrialised and Third World countries can be drastically altered in the short or medium-term. The process of building up an endogenous scientific and technological base for industry is a very long one, and requires determined and sustained efforts for considerable periods. Nevertheless, there are many actions that could be taken in the short and medium run, both to set the stage for subsequent and more substantial efforts, and to ameliorate some of the harmful effects associated with indiscriminate technology imports.

E

578

R. Sagam

It is clear that the opportunities for industriat S&T devdopment that would increase decision autonomy are bounded from above by the growth and evolution of industry iself. If industrial S&T capabilities (research and development, technical education, support services, experimentation, information, etc.) are developed beyond the state of locaf industry, they would fall in a vacuum as there would be no effective demand for them. Research institutions would become self-centred, skilled personnel would emigrate, and resources would be wasted in the development of an infrastructure that could not be put to effective use. On the other hand, industry is more often developed beyond what would be an appropriate or corresponding level in terms of a local S&T base for the generation of technology and for absorbing imported technology, and opportunities are lost to build an industrial S&T base. The frequent case in which turnkey plants are imported in package form provides an example of developing a productive capacity without building the corresponding technological capabilities. Thus the problem is one of balancing the development of industriat production with that of an S&T capacity so that one would reinforce the other. In this process, engin~~ng activities and the devetopment of an engineering science basis which would permit the absorption of imported technology becomes perhaps more important than the growth of a local research and development capacity. Role

ojthe State

Considering, on the basis of past experience, that market forces on their own will not lead to the development of an endogenous S&T capacity in Third World countries, then the crucial question is: What is the role of the State in the process of design and impiementation of industrial science and technology poiicies? Most Third World countries are mixed economies in which the State plays a very important role as a regulator of economic activity, as a direct agent of production, and as a provider of basic services. Therefore, it becomes imperative to examine whose interests does the State represent: those of traders, of exporters of primary commodities, of the local industrial bourgeoisie, of foreign enterprises, of the military, of landholders groups, of peasants, of unionised urban workers, etc.?: how do these interest groups obtain access to and share power? what does the relative predominance of one or another mean for local industry? Following from this, what is the relative importance of industrialisation objectives’? what industrialisation strategy is to be followed? who will pay? Finally, what is the role (if any) awarded to S&Tdevelopment objectives? There are no easy answers to these questions, they will certainly be subject to different interpretations at a given moment, and they will certainly change over time. However, they need to be answered and revised continuously if the design and the implementation of industrial S&T policies is to proceed in accordance with the realities of the development process. Furthermore, the answer to the preceding questions will determine the operating environment for S&T policy instruments, and whether it is possible to define a S&T policy which would correspond to industrial development policies. THE FUNCTIONING

OF POLICY INSTRUMENTS

A policy can be defined as a statement of government intention, expressed by a government officiai or institution, stating a purpose, setting objectives, specifying desired outcomes and

Science

and T~hnofog~ Poiicies,jor Development: A Reotew of Problems and issues

579

establishing targets. Policies provide criteria for generating and choosing among alternatives in the performance of functions and activities, thus guiding decision-making. Because a policy is only a statement of intention, it needs to be supported by policy instruments -the means by which it is put into practice. Policy instruments are the vehicles or mechanisms used by policymakers to orient other people’s decisions, i.e., they are the connecting link between the purpose expressed in a policy and its actualisation. Explicit science and technology policy instruments are those intended to affect directly the decisions having to do with the growth of S&T capabilities. Implicit S&T policy instruments are those that, although referring to policies, functions and activities other than science and technology, have a sjgnificant indirect or second-order impact on s&T decision-making. Of particular importance for the grovvth of local S&T capabilities are the policy instruments related to the process of industriahsation, for they influence the pattern of demand for technology, the importation of technology, and the capacity of the productive sector to absorb and assimilate technology. (See Table 1 for an illustrative list of S&T policy instruments.)

Table I. Illustrative List oj S&T Policy Instrvments Policy instruments to build up an S& 7 iqjrastrvctvre S&T planning (explicit) l Financing of S&T activities (expiicit) l Manpower training (explicit) l

Policy j~t~rnents to rep&ate ie~hno~0g.vimports l Registries of technology transfer (explicit) l Import contrds (implicit) l Foreign investment controls (implicit) l Joint-ventures (implicit) Policy instruments IOdejine thepattern oj demandfor technology l industrial programming (implicit) l Industrial financing (implicit) l Price controls (implicitj l Fiscal measure (implicit) l State purchasing power (implicit) l Export promotion measures (implicit) Poiicv instruments IOpromote the perf ormance qf S& 7 activities in enterprises l Special credit lines (explicit) l Fiscal incentives (explicit) PO!@ inst~menfs to support the pe~ormance of Sk T activiries l Consulting and engineering design organisations (explicit) l Technical norms and standards (explicit) l Technical information systems (explicit)

Policy instruments and industrialisation As a result of the interaction among different interest groups competing for control of the State, and of the resultant economic and industrial development strategy, State intervention in Third World countries like those in STPI has been mainly oriented towards setting the conditions for rapid industrial growth, and that of private industry in particular. Thus policy inst~me~ts have been employed to promote the expansion of industry in general, but have seldom been used to orient the pattern of co~umpt~on and the corresponding industrial structure.

580

F. R. Sanasti

For example, among the array of industrialisation policy instruments found in the STPI countries, it is usual to find measures which apply across the board to all industries, and which are aimed at reducing the cost of labour (subsidies and tax rebates on payrolls to encourage industrial employment, training of the labour force in government organisations); reducing the cost of capital (easy credit terms for industry. tax incentives to promote investment); providing basic services and industrial inputs at low cost (energy, water, transport, communications, iron and steel); and restricting imports of competing goods (tariffs, import licences, foreign exchange controls). Industrial firms thus operate within an environment of promotional measures, which usually apply both to locally and foreign-owned enterprises, even though sometimes the former are, at least nominally, given more support. Industrial science and technology policies are correspondingly vague. In the absence of a well-defined and discriminating industrialisation strategy, S&T policies can only be of a general supportive nature. The instruments used to put it in practice thus have a relatively passive character, providing incentives and inducements, setting a general infrastructure for industrial S&T, but are incapable of guiding the development of scientific and technological capabilities for industry. The converse is also true, and those countries which have defined an industrialisation strategy, established priorities, and determined the scope and nature of government intervention, have also found it necessary to engage in the formulation of S&T policies that would give support to, and be in harmony with the aims of, industrial development. A basic issue that must be considered when examining the impact of S&T policy instruments: whether policy instruments used to implement industrial development policies in general have any significant effect on the behaviour of productive units. There are cases in which the array of policy instruments has been designed with little knowledge, or with a very nai’ve understanding, of the nature of industrial productive activities, the rationality of entrepreneurs, and the play of forces orienting the expansion of industry. The result is that policies and policy instruments are formally superimposed on an industrial structure that does not respond to the prescriptive, motivating or coercive measures they contain: while policy instruments are designed and implemented according to an assumed or perceived reality by government, in fact industry operates according to a different logic and responds to different stimuli. Clearly, in such a situation, S&T policy instruments stand very little chance of being effective.

The process of policy implementation It is difficult to characterise S&T policy instruments individually, and in any case, it is more important to examine their interactions. For this reason it is appropriate to characterise the array of policy instruments, both explicit and implicit, as a whole, focussing on a few characteristics that define the style of policy implementation. Some specific features of the policy implementation process are highlighted here.

Generality. The majority of the policy instruments identified in the STPI project were designed to operate at the level of industry as a whole or of industrial branches, in the sense that their impact was to be felt in decisions regarding overall industrial growth and in interbranch decisions (e.g., incentives to promote investments, tariff structures to foster the growth of certain branches). Other policy instruments were designed to affect decisions on product lines within a particular industrial branch (e.g., incentives for specific types of products, tax

rebates for certain manufactured exports). ~jnaIIy, there were just a few instances in which policy instruments had been designed to affect specific technological choices within product lines (e.g., industrial credit tied to the use of a certain t~hno~ogy~. Most policy instruments were found to apply across the board to all industrial branches and all types of enterprises, regardless of’ the products they manufactured or the technologies employed. Some policy instruments are designed in such a way that ~~c~~~~o~u~~ power is vested in the government agencies that are in charge of applying them. in theory, this is supposed to counteract the generality of the policy instruments, for the agency could discriminate according to the particularities of each case. While this has been attempted in a few cases, the lack of we11defined criteria for the use of discretionary power has in fact precIuded the more selective use of policy instruments, ~e~ero~e~e~~~. In most sTP1 countries a large array of policy instruments of various types, r~pond~ng to different policy orientations, and assuming different forms of ration~ity of industrial ente~r~ses, were found coexisting together, even though a certain propo~ion of them were not actually used. This diversity in the array of policy instruments does not alter their generalit}~for most of them, however differe*t~ remain at a rather general level in terms of the effects they have on techno~ogi~~ decisions. The heteroge~eiry has been a consequence of the temporary presence in government of certain power groups which sought to advance their own interests and designed new policy instruments accordingly, leaving the preceding structure of policy implementation virtually unchanged. Thus in some countries it is possible to find differeilt vintages of policy instruments, of which oniy the latest were in fact put into practice. Another reason for the heterogeneity of the array of policy inst~men~ is derived from power conflicts wjthin the State. Given that government is not a homogeneous entity, certain policy instruments -and the agencies that are supposed to implement them - may fall under the influence of com~ting groups seeking to use them for {heir own purposes, The result is a rather mixed set of policy inst~ments and criteria used to put them into practice. This is most notjceab~e when policy instruments involve d~scret~o~a~ power, when there is institutional dispersion, and when there is lack of coordjnation in the a~pl~~t~on of policy instruments.

Passivity. The majority of policy instruments idtmified in STP!required that the agency in charge take a passive attitude, with the initiative for the actual application of the instrument having to come from the pr~uctive units, research orga~isations, en~n~~ng firms, etc., that were to be affected by them. This was closely related to the positive nature of the instruments, for most of them provided incentives to the industrial firms, which were supposed to take the necessary steps to obtain the benefits (tax ~nce~t~v~, preferenti~ credits, tariff prot~tjo~, tax rebates, etc.). In practice, however, the eff~tiveness of these jnstruments was limited by the lack of know~~ge regarding the conditions of their app~cation on the part of those who were suppose to benefit from them. Relatively few ente~rjses took advan~ge of the o~~rtun~ies offered by the policy instruments and this led to a relative co~centrutjo~in their ap~~~catjon: a small number of industrial firms accounted for a large share of cases of ap~i~~tion of policy instruments, and the same firms appeared as benefiting from several of them. This meant that the majority of enterprises were not affected by gove~me~t measures and worked without paying attention to them, which led to the effective ~~~~~na~~at~~~ of the poficy instruments. Furthermore, the condjtio~s for the application of instruments were often defined in such a

F. R. Scnusri

582

complex way that they became irrelevant to all but a small number prises having the means to apply for and secure the benefits.

of large industrial

enter-

Redundancy. This characteristic is found when there is a rather large number of policy instruments which are supposed to act in the same direction, particularly by conferring benefits to industrial enterprises. For example, many instruments were found which lowered the cost of capital for enterprises (e.g., various types of special credit lines, tax rebates on interest payments, low tariffs for the import of capital goods, special tax exemptions for reinvesting profits, accelerated depreciation rates, special tax credits for investment in certain regions, basic infrastructure services provided by the State, and so on). Thus one policy instrument after another helped in lowering the cost of capital in order to promote investment. Even though each of them may have a special purpose in mind, their combined effect in fact cancels the impact that any policy instrument may have individually. Practically any industrial firm could benefit from several of these policy measures, and many firms would seek to benefit from most of them. Thus the fact that there is a large number of different policy instruments oriented in the same direction, that they are rather general and apply to any enterprise, that the initiative rests with the firms that are supposed to benefit from them, and that they are applied by different government agencies, leads to a very complex policy implementation structure, and one in which the accumulation of possible benefits from various redundant measures makes any one of them rather ineffective. Notice that this redundancy is closely related to the concentration of the benefits of policy instruments. Incompleteness. Most of the characteristics mentioned above are pertinent to the positive policy instruments designed to induce or motivate a certain behaviour on the part of industrial enterprises. When examining the negative policy instruments, which are supposed to impose certain restrictions and to control the behaviour of industrial firms (e.g., import restrictions, foreign exchange controls registry and approval of licensing agreements, etc.), it was found that most of them did not cover the whole range of productive units. that they left ample room for exceptions, and that State enterprises were particularly prone to circumvent the regulations designed to stimulate the growth of local industry and foster the development of indigenous technological capabilities. For example, import prohibitions of equipment and machinery, intended to promote local production, were often ignored or revoked by State enterprises or government agencies, and the same applied to the signing of licensing agreements containing restrictive clauses forbidden by existing legislation. Thus these negative policy instruments were found to be incomplete and likely to be circumvented through exceptions.

THE IMPACT

OF S&T POLICY

INSTRUMENTS

ON TECHNICAL

CHANGE

From the preceding observations, it is clear that policy instruments do not affect technological decision-making and technical change at the branch and enterprise level in a linear and straightforward manner, and that there are many complex factors and conflicting sources of influence intervening in the process of S&T policy design and implementation. In addition to the context of industrial development and the functioning of the government machinery, it is necessary to examine the orientation and pace of technical change in order to understand and assess the possible impact of policy instruments.

Science and Technology Policies,for Development: A Review oj Problems and Issues

583

An issue that must be kept in mind when examining the impact of policy instruments on technical change, is that the technological innovations introduced in Third World countries originate -for the most part -in the industrialised countries. While in these countries technical improvements result from the interaction of factor endowments, market forces and competitive strategies, innovations are usually introduced in Third World countries after they have been developed, tested and applied elsewhere. For this reason, the range of industrial technologies at the disposal of Third World countries can be considered as determined by external factors, even though the selection of a specific technology still leaves room for shaping the evolution of the local technological base. There are three categories of factors that must be taken into consideration when examining the impact of S&T policy instruments on technical change at the industrial branch level: the characteristics of the technology itself and the nature of technical change taking place; the structural and dynamic characteristics of the industrial branch; and the main features of the enterprises. The characteristics oj technology and the nature oj technical change can be studied from several points of view. For a particular type of productive activity it is possible to focus on: changes in product, process or materials technology, identifying major trends and the factors that condition them; a particular innovation, which may be singled out for study and followed through its diffusion in the branch; a chain of productive activities, studying the process in an integral way from the provision of raw materials and inputs, through their successive transformations, to final product, and looking at the techniques used in each stage; or focussing on the way in which technology is mainly incorporated into the productive process (through equipment and machinery, process specifications, product specifications, intermediate products, or through human resources). The objective of this analysis would be to identify the way in which technology is related to the structure of the branch and to the characteristics of the enterprises, so that the constraints and limitations imposed by the intrinsic characteristics of the technology may be understood clearly in order to assess the impact of policy instruments. The structural and dynamic characterrjtics of the branch constitute the second category of factors to be examined so as to understand better the process of technical change and the impact of policy instruments. Factors such as the size and rate of expansion of the market, which provide opportunities for existing firms to expand their activities and new ones to enter the field; the degree of concentration of production, which would influence the nature of competition; the relative weight of foreign investment, which would affect the pattern of demand for technology; and the geographical dispersion of production, which may divide the market in various segments, must all be taken into account. Of particular importance is the way in which the branch under study is articulated with the rest of industry and the economy, i.e., whether it is dependent on imported or local raw materials, inputs, and equipment, whether it is largely isolated or is closely linked to other industrial branches; whether the products manufactured are final consumption, intermediate or basic, and so on. This would give an idea of the relative importance and impact of technical change’in the branch and of the sources of such change. However, the most important factor to be examined in this category is the predominant form of competition among the firms in the branch, and the role that technology plays as a

584

F. R. Sanasrr

channel or mechanism of competition. The form of competition to branch, and the role of technology will change with characteristics of a given industrial branch.

will vary widely from branch the structural and dynamic

The predominant channels or mechanisms of competition which a firm may employ involve price reductions to capture a larger share of the market; product diversification to expand the edsting market or create a new one; development or distribution channels to place the product close to the consumer: provision of after-sale services to secure consumer loyalty; specialisation of production to exploit market niches; promotion of exports to transcend the limitations of local markets; regionalisation of production to take advantage of lower transport costs when demand is dispersed; vertical integration to ensure the control of raw materials and intermediate products; introduction of new production technologies to take advantage of economies of scale, increased productivity, and of more efficient use of inputs with the aim of reducing costs: and so on. A combination of these mechanisms will be used by different firms in the various industrial branches to define their competition strategies. The predominant form of competition resulting from the interaction among firms will condition the relative importance of technical change in the strategies of individual firms, and in consequence, the impact that the different policy instruments are likely to have on the development of S&T capabilities in the branch. The third category of factors refers to the characferistics oj’rhe enferprises conforming the branch. These emerge not only as a result of the particular strategy followed to compete with other firms, but also out of factors such as size, ownership structure, location, degreee of technical expertise within the firm, financial structure, and managerial attitudes. These factors would affect an individual firm’s decision to introduce a particular technical innovation, the sources from which it will be obtained, the way in which it is to be incorporated into the productive process, and so on. In the last analysis, the building up of technical capabilities in industry can only be achieved through the aggregation of the technical capabilities of individual enterprises, and of the other organisations and agencies involved in industrial science and technology. Even though each category has been analysed individually, and the factors that were found important have been just listed, the important issue is how these categories of factors interact with each other to set the ground for the technological evolution of a particular industrial branch, and thus to condition the impact of S&T policy instruments. It is rather difficult to describe these interactions in abstract, for the formulation of a satisfactory theory of technical change in Third World countries is still a long way from being achieved. The framework of these three categories, and the factors that have been identified in each, provide a guide to proceed in the identification of the major conditioning factors of technical change in industry and of the impact of S&T instruments.

CONCLUDING

REMARKS

After the difficulties involved in building up indigenous S&T capabilities for industry have been made evident in the precedin, 0 remarks, it is worthwhile to recall the reasons Mhy a

Science and Techno1oR.k’Policies Jor Developmenr:

A Review oJ Problems and Issues

585

Third World country should attempt to develop such capabilities. If decision autonomy to orient the process of industrial development towards national objectives is valued at all, then a measure of control over this process must be acquired in order to develop options and choose the best route to follow. The possibility of controlling a country’s industrial destiny will rest increasingly on the ability to evaluate, choose and absorb imported technology; and on the capacity to generate local technology and to transform it into viable industrial projects, for this is absolutely necessary to develop the country’s own industrial S&Tcapabilities.? Furthermore, as the development process proceeds and the country is able to generate a viable accumulation scheme and an economic surplus, the possibility of transforming this surplus into investment internally and without having to rely totally on the industrialised world, will be determined by the level of the country’s S&Tcapabilities and by the degree of development of its capital goods industry. Hence, any efforts to increase autonomy and to become more self-reliant necessarily pass through the development of indigenous S&T capabilities. But it is also necessary to acknowledge that the development of these S&T capabilities, and of an endogenous scientific and technological base for industry, will take very long for most Third World countries. Nevertheless, it is also necessary to accept that development (whichever political or social form it takes) is not viable if the potential benefits of modern science and technology are rejected: regardless of ideological or personal preferences, science and technology are necessary components of any development strategy in the last third of the 20th Century. However, this does not mean that it is necessary to follow the Western style of development, the sequence of stages it went through, or the particular way of using science and technology it implies; there is room for choice - albeit limited -but it can and should be exploited to the fullest possible extent. Furthermore, because of the wide disparities in S&T endowments between the industrialised countries and those of the Third World (which have a historical origin going back several centuries), the possibility of changing rapidly and radically the existing state of affairs with regard to science and technology are minimal. However, the margin for manoeuvre within these absolute constraints is certainly larger than is perceived by most leaders from the Third World countries. The economic upheavals of the Western industrialised economies in the 197Os,the measures taken to initiate the transition towards a New International Economic Order, and the international redistribution of industrial activities which is just. becoming discernible, could open new opportunities for the Third World countries. Therefore, within a changing world context, strategies of industrial S&Tdevelopment should be devised, specifying areas in which local S&T capabilities are to be developed fully and indigenous technologies are to be made the basis of productive activities; areas in which capabilities for choosing, modifying and absorbing imported technologies must be built up; and areas in which the existing base of traditional technologies must be preserved and developed further. But then, what is the function of S&T policy instruments in this process of exploiting the limited opportunities available to develop local industrial S&T capabilities? The mere 2For a discussion (New York. Praeger

of these ideas see: Francisco Publishers (in press).

R. Sapasti,

Technology,

Planning and Se!/-Reliant

Developmenr

586

F. R. Sqasti

formulation of policies and design and operation of policy instruments is bound to fail, regardless of good intentions, unless they are embedded in a context which favours s&r development; unless they are c!ose!y articulated with industrial development policies; and unless the characteristics of technological change, of the srructure, and of rhe enterprises in particular branches of industry are integrated into the process of designing and operating S&T policies and policy instruments.