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Incentives for Private Investment in R&D and Business Innovation

Date: 06 Jun 2011 to 07 Jun 2011

Time: 8:30 AM

Location: Washington DC, United States

Regional Policy Dialogue: Science, Technology and Innovation Network

Venue: Inter-American Development Bank, Washington D.C., Enrique Iglesias Auditorium CR-2

Objective of the meeting: The purpose of this meeting is to establish a dialogue among policy makers from Latin America and the Caribbean countries about which are the most appropriate incentives available to promote private investment in R&D+i and increase productivity. As a result of this dialogue and exchange of experiences we expect to have a better understanding of the effectiveness - in terms of impacts on productivity - of public investments destined to encourage private investment in innovation. It is also expected to obtain a better understanding of what tools or combination of instruments can be more efficient in the different environments found in our region.

Event Agenda


Additionally, at the end of the dialogue on the specific topic of the call, a separate place will be offered to advance on the proposal of Axis 1 of the Guanajuato Action Plan regarding the articulation of public policy dialogues on innovation, as was approved at the March 26, 2011 meeting of ministers and senior officials.

Background: Since 2007, the Inter-American Development Bank (IDB) has been organizing meetings of the Regional Policy Dialogue on Innovation in which topics of interest to the countries have been presented and discussed. These meetings have produced a series of results of practical value to the countries of the region and have also been very useful for the Bank to better understand the needs of countries in Science, Technology and Innovation (STI), and thus adjust its products to these needs.

In these IDB Dialogues, a number of issues have been addressed, such as the evaluation of public programs that support technology and innovation; international technological cooperation policies: an analysis of bilateral and multilateral practices; technology and economic inclusion in Latin America; general funds vs. sector funds to support innovation; innovation in the design and execution of digital strategies.

Justification: Investment in R & D in Latin America is very low when compared with developed countries and other emerging economies. Moreover, most of that investment is led by the public sector, unlike what happens in the more advanced countries. An increase in private sector investment in innovation, which can have a more direct impact on productivity increases in businesses, thus becomes a priority for STI policies in most countries of the region.

There is a diverse array of public policy instruments that can encourage private investment in innovation; from direct support through grants or public procurement to tax concessions, may all be - if well designed - efficient incentives for private investment. Although tax incentives have not been widely utilized in Latin America and Caribbean innovation policies, trends such as its increasing use in advanced countries, augmented levels of transparency and fiscal pressure, and the initial experiences of some countries in the region, all point towards the necessity to consider them as alternatives with an interesting potential. However, given the heterogeneity in the innovation capabilities of companies in the region, instruments such as subsidies or tax incentives, which in other contexts are widely used, in Latin America are often limited to groups of firms of excellence. This raises the challenge for STI policy in the region on how to successfully increase the number of companies with innovation activities. So far this has been addressed through technological extension, transfer and absorption programs designed to help businesses to better identify their competitive weaknesses and incorporate product or process innovations already available.

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