the Program for Sustainable Investment (PSI) is also worth emphasizing. ..... http://bvsms.saude.gov.br/bvs/saudelegis/gm/2008/prt0978_16_05_2008.html ...
12th Globelics Conference in Addis Ababa, Ethiopia Advances and limitations of Brazilian innovation policy over the last decade Marina Szapiro1, Marco Vargas2 and José Cassiolato 3
ABSTRACT This paper discusses the main outcomes of the Brazilian innovation policy in the last decade based: on a brief analysis of the industrial and the science, technology and innovation policies in force in the country during this period; on the discussion about the nature of specific mechanisms aimed at fostering innovation; and on a set of data of the Brazilian Innovation Survey (Pintec) conducted by the Brazilian Institute of Geography and Statistics (IBGE) about the use of government programs to support innovation by Brazilian firms and about the spending on innovation activities by Brazilian companies of selected sectors. It is suggested that, although there has been a substantial increase in the volume of resources earmarked for supporting innovation and the reestablishment of industrial and innovation policy in 2003 (where innovation has taken the role of key variable), the new policy instruments intended to support innovation did not produce the expected and desired results. It is argued that the limitations of those tools are related to the use, albeit implicit, of the linear model of innovation. In this sense, although the new industrial policies have shown an increasing focus on innovation, the policy mechanisms could benefit from the incorporation of a systemic view of innovation, thus contributing to accomplish the objectives of industrial and innovation policies regarding the increase of innnovative capacity in the Brazilian economy.
KEYWORDS: Industrial and innovation policy; system of innovation; pharmaceutical industry, telecommunications equipments industry, systemic innovation policies.
1
Economics Institute, Federal University of Rio de Janeiro and RedeSist. Economics Department, Federal Fluminense University and RedeSist. 3 Economics Institute, Federal University of Rio de Janeiro, RedeSist. 2
1
1. Introduction Over the last decade, the issue of innovation has gained increasing importance in the Brazilian government policy agenda. In fact, since 1999 when a new funding scheme (the sectorial funds) was introduced, the government budget for science, technology and innovation has significantly improved. From 2000 to 2010 the federal government committed approximately R$ 50 billion (in current values) to support innovation, 55% out of which refer to tax exemptions (Bastos, 2012). Since 2004, when the Brazilian federal government started again to produce industrial plans and policies, support to innovation has become a major focus of the federal government actions. Each of the industrial policy documents launched since then - the 2004 Industrial, Technological and Foreign Trade Policy (PITCE), the 2008 Production Development Policy (PDP) and finally the 2011 Plan Brasil Maior (PBM) not only put innovation in the centre stage but was accompanied by science, technology and innovation (S, T & I) policy plans, namely: the 2006 Science, Technology and Innovation Plan of Action for National Development (PACTI); the 2011 National Strategy for Science, Technology and Innovation (ENCTI) and the 2013 Inova Empresa. The analysis of the evolution of industrial and technological policies over the last decade reveals an expansion of mechanisms aimed at encouraging the various types of innovation (e.g.: reimbursable and non-reimbursable financing, equity participation, and tax incentives). It is true that some of the policy tools for supporting innovation that were available in the last decade had been created in previous periods. However, a substantial increase was observed in the volume of resources earmarked for supporting innovation, in the context of change in federal government's policy strategy. To this end, crucial changes were introduced in the legal framework that supports innovation, which, among other things, allowed the resources aimed at promoting innovation to be accessed directly by the production sector. The new Brazilian innovation policy is structured around two main pillars. The first one comprises a set of tools aimed at fostering interaction between the universities and research centers and the industrial sector. It is based on the recognition that the Brazilian S&T infrastructure is fairly developed and that, therefore, encouraging its greater interaction with the production sector will contribute to enhance the national innovative capacity. The second one comprises the provision of a set of both reimbursable and non-reimbursable financing for innovation in the private sector. It is based on the belief that, in order to reduce costs and risks of innovation activities, it is necessary to expand direct support to enterprises for innovation. The promotion of university-industry links in Brazil has been subjected to intensive discussion and some key evaluations (Rapini et all, 2009; Mello et all, 2011 and Fernandes et all 2010) have pointed out that up to now policies have not worked as imagined. The extensive use of financing mechanisms to spur innovation, however, 2
have not received similar attention. It is this later feature of Brazilian innovation policy that is the focus of analysis in this article. The purpose of this paper is precisely to discuss the main results of this part Brazilian innovation policy in the last decade. Based on the description and a brief analysis of both the industrial and STI policies adopted in the country in this period, this work analyses a selected data set from the Brazilian Innovation Survey (Pintec) conducted by the Brazilian Institute of Geography and Statistics (IBGE). On the basis of the proposed analysis, and resorting to the Neo-Schumpeterian theoretical framework of national innovation systems, this paper presents the main advances and limitations of recent Brazilian innovation policy. It is suggested that, although the industrial policy has been reestablished in 2003 having innovation as a central objective, the new mechanisms intended to support innovation did not produce the expected and desired results in terms of increased competitive and innovative capacity of Brazilian industry. It is argued that the limitations of these tools are related to the use, albeit implicit, of the linear model of innovation. Although the new industrial policies have shown an increasing focus on innovation, the policy mechanisms could benefit from the incorporation of a systemic view of innovation, thus contributing to the objectives of industrial and innovation policies regarding increased innovative capacity in Brazil. This article is organized as follows. In addition to this introduction, the second section provides a brief discussion of the applied theoretical framework, showing the development of the interpretation on the innovation process, from the 1980s until the formulation of the concept of national innovation system and its repercussions in terms of implications for innovation policy. The third section describes the main institutional changes occurred in the last ten years, and the major approaches of the industrial policy and the science, technology and innovation policy in Brazil. The fourth section presents an analysis of the results and limitations of the Brazilian innovation policy based on data from PINTEC and discusses the experience of industrial and STI policies in the telecom and pharmaceutical industries. Finally, the fifth section presents the main conclusions of the paper.
2. National Innovation System and Innovation Policy As previously observed, this work builds on the idea that most limitations in the outcomes of the science, technology and innovation policies in Brazil is related to the fact that the development and implementation of new mechanisms for supporting innovation are strongly based on the linear perspective of innovation. In this perspective, the innovation process starts with scientific activities that then are developed into technology, which enters the production system and, finally, the market, 3
through consecutive steps. The basic research is responsible for the advancement of scientific knowledge from which applied research is conducted and, subsequently, the development experiments until achieving innovation itself. Thus, according to the linear view, countries should invest in the advancement of basic research in order to obtain technical progress. The practical consequence of this view, in terms of innovation policy implications, is the predominance of tools intended to support scientific and / or R & D activities (Costa , 2013). In the 1980s, Kline and Rosenberg (1986) produced several criticisms over the linear view of innovation (related both to the view of technology push and of demand pull), which resulted in the proposal of the Chain Linked Model. This model represented a shift in the understanding of the innovation process in relation to the linear model of innovation. According to the chain linked model, innovation is seen as a complex and cumulative process, involving a set of feedbacks between its different stages and various spheres, both internal and external to the firms that participate in the innovation process. It is from the 1980s on, with the debates surrounding the interpretation of the innovation process, that the perspective of innovation as a systemic and iterative process appears in the academic literature and in OECD policy documents, highlighting the importance of firms’ both formal and informal networks, and giving rise to the concept of the innovation system. The systemic approach to innovation, built on the Neo-Schumpeterian and evolutionist theoretical framework, was developed with basis on empirical studies conducted in the sixties and seventies, which analyzed, under different perspectives, the characteristics and sources of the innovation process (Cassiolato and Lastres, 1995). In general, this approach seeks to understand how the various activities (internal and external to firms) and institutions (universities, research centers, etc.) involved in the innovation process contribute to and affect this process4. This interpretation of the innovation process enabled a more accurate understanding about how innovations are effectively created and disseminated in the economic system. The broad approach5 of innovation systems considers that innovation does not occur independently in the firms, but rather within a system in which direct and/or indirect, formal and/or informal relationships are established between several institutions and organizations, including educational and research institutions, government and other firms. These relationships are also affected by the macroeconomic environment in 4
The basic references for this approach are the collection of articles on technological change and economic theory (Dosi et al, 1988), the classic work by Freeman (1987) on Japan and the books on National Innovation Systems edited by Nelson (1993) and Lundvall (2007). 5 For a discussion on the differences between the broad view and the limited view of the innovation systems, see Lundvall (2007).
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which they operate. It is noteworthy that, unlike the linear perspective, the systemic approach recognizes that innovation goes beyond the formal R & D activities, being the outcome of collective processes that involve firms interacting with each other and with the various public and private institutions (Cassiolato and Lastres, 2005). According to Costa (2013), the systemic approach of the innovation process enables a new understanding of the role and importance of the innovation policy. This approach emphasizes the role of policies that directly and indirectly affect innovation as a key factor that influences other subsystems, thus helping to determine the innovative performance and capacity of firms. The state appears as a crucial actor in this perspective for it has the ability to change the competitive environment, providing favorable conditions for innovative strategies of firms (Gadelha, 2001). Therefore, and given the importance of policies within the innovation system approach, we highlight one of the most relevant (and interesting) aspects of this perspective. It regards to the fact that the development of the interpretation on the innovation process occurs jointly with the development of the discussion about the most appropriate innovation policy to foster the innovative capacity of countries, regions, industries etc. According to the systemic approach, the innovation policy should take into account the complexities of the innovative process and focus on the interactions between the system’s agents. A key aspect of the innovation policy is the need to consider and understand the relationships between the various subsystems that compose the innovation system (funding, science & technology infrastructure, production base, etc.), and to identify the different needs of firms and institutions participating in the process, as well as the different requirements related to the various stages of the innovation process. One of the most important implications of the systemic approach for the design of innovation policies is that it enables to know that the policy tools intended to support scientific and technological infrastructure and to fund research and development activities are not sufficient to lead to the development of innovative capacity of a country. An innovation policy adequate to the systemic approach should consider the links between the various subsystems and between different instruments of direct and indirect support to innovation (supporting and financing to the development of R&D infrastructure, support and funding of innovative activities, public procurement policy, sectorial regulation, support and funding to the development of collective actors, etc.).
3. Evolution of Innovation Policy in Brazil in the last decade: new legal framework and innovation supporting tools
During the 1980s the macroeconomic problems (external debt and inflation, mainly) prevailed over microeconomic concerns and the next decade was marked by the 5
implementation of neoliberal policies and by almost entirely absence of science, technology and innovation policies, except for specific measures in some particular sectors. It is from the late 1990s that the federal government began to devise some tools and budget devoted to science, technology and innovation, and that a change, although shy, in the political agenda of science, technology and innovation takes place in the early 2000s. The 2000s, especially since 2003, is characterized by the resumption of the industrial policy in Brazil, and innovation becomes a key variable for increasing the competitiveness of the economy. In this sense, incentives to innovation acquire growing relevance as a development strategy in the formulation of the industrial policy. The resumption of budget for science, technology and innovation was made possible by the creation of the Fund for Scientific and Technological Development, known as Sectorial Funds, by means of the Law 10168 of 2000 that created a new tax, levied on companies that deal with technology transfers, aimed at financing the program for Incentive to University-Industry interaction for Fostering Innovation. It is worth noting that a significant part of the initiatives financed by the sectorial funds involve cooperative projects between enterprises and research institutions and universities. Since 1999, sixteen sectorial funds were created, fourteen out of which aimed at specific sectors (aeronautics, agriculture, Amazon region, waterway, biotechnology, energy, space research, water resources, information technology, mineral resources, oil, health and transport) and two were funds created with a horizontal character: the Green-Yellow Fund aimed at supporting integration between university and enterprises, and the fund for financing infrastructure of Science and Technology institutions (CTinfra) whose purpose is the recovery and expansion of the scientific and technological infrastructure. Although being created under a neoliberal perspective of the innovation policy6 (during the second government of President Fernando Henrique Cardoso), these Funds represented a substantial change in the Brazilian innovation policy, since they allowed a significant increase in resources aimed at fostering innovation in Brazil, and provided greater sustainability to the volume of resources earmarked for innovation policy. During the period under analysis in this paper (2003 to 2013), the sectorial funds enabled a significant increase in funding for innovation, both in terms of reimbursable and of non reimbursable financing.
6
For an in-depth discussion on the political and ideological tendency of the distinct periods of the Brazilian innovation policy since 1995, see Koeler (2009).
6
The resources of the sectorial funds were integrated into the National Fund for Scientific and Technological Development (FNDCT)7, thus contributing to restore the budget of the Financing Agency for Studies and Projects (FINEP), the main source of support and funding for innovation in Brazil, when it comes to non-reimbursable funds. In fact, from 2000 to 2010 the resources of sectorial funds totaled R$ 12.6 billion in current values (Bastos, 2012)8, leading to a substantial increase of FNDCT resources. As it can be seen in Figure 1, the resources of the FNDCT have raised from 107 R$ millions in 1999 to R$ 4.2 billion in 2012. Figure 1: Evolution of the National Fund for Scientific and Technological Development - FNDCT - 1999-2012 (in million R$) 4500
4216
4000 3537
3500 3000 2510
2500 2000 1318 1408
1500
2789
2016
918
1000 500
1617
1850
2639
107
245
461
0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Elaborated from MCT data. The most significant changes in the strategies and actions of industrial and innovation policies have begun in 2003, when president Luís Inácio “Lula” da Silva took office. From then on, innovation has become increasingly embedded in the discourse and practice of industrial policy in Brazil, and a number of new instruments for promoting innovation were created. From the point of view of Science, Technology and Innovation (ST&I), the first administration of president Lula kept unchanged the National Policy on Science, 7
The FNDCT was created in 1969 and since 1971 Finep became its Executive Secretariat. Initially, the Fund consisted of resources originated from the National Treasury, thus having a rather instable annual budget. 8 It is worth pointing out that the financial aid come from the sectorial funds could have been still greater if the federal government were not allocated the resources of the sectorial funds to contingency funds in almost every year of the period.
7
Technology and Innovation (PNCTI) applied by the predecessor government (Fernando Henrique Cardoso). However, in what regards to the industrial policy, the government enacted a new policy, the Industrial, Technological and Foreign Trade National Policy (PITCE), which provided for the implementation of incentives to foster innovation in the enterprises and sought to identify strategic areas in which the federal government should invest. It is worth pointing out that, despite having selected some priority sectors (semiconductors, software, capital goods, drugs and medicines, and activities seen as bearer of future economic benefits, such as biotechnology, nanotechnology and renewable energy), the PITCE favored the horizontality of the incentive tools (Bastos, 2012). During this period, important changes in the legal framework referred to innovation have been promoted, among which it is worth mentioning the enactment of the Law of Innovation and of the “Lei do Bem”. These two laws provided the legal basis for changing the procedures by the federal government in support to innovation, especially regarding support and financing for innovation activities of private companies. The Law of Innovation (Lei de Inovação), enacted in October 2005, was based on the idea that the government should stimulate and expand the support for universityindustry partnerships, thus promoting the participation of universities and research centers in the innovation process and stimulating the transfer of knowledge from universities to enterprises. In addition, this Law included mechanisms to support the innovative activities of private companies through the transference of non-reimbursable public resources. This law provided for the availability of an economic subsidy to the enterprises, through non reimbursable financing with funds from the public budget9. As of 2006, FINEP started to implement the Economic Subsidy Program whose resources were originated from FNDCT. This instrument can be considered as one of the main pillars of the Brazilian innovation policy and represented a step forward by allowing non reimbursable funds to be granted to Brazilian enterprises. The other act amending the Legal Framework that supports innovation was the “Lei do Bem”, enacted in 2007, which provides for tax incentives for technological innovation, as well as other incentives such as exemption from income tax, accelerated depreciation and accelerated repayment, grants to researchers, masters and PhDs. Furthermore, the “Lei do Bem” has bound economic subsidies to the resources from sectorial funds and to the funding for projects involving cooperation between companies and scientific and technological institutions (Koeller, 2009). In 2008 the government made a review of the industrial policy with the launch of the Production Development Policy – PDP. This policy’s main objective was to give 9
It is worth noting that the initiatives of granting non reimbursable funds to enterprises was already included in Brazilian legislation since 2001, although it was Just in 2005 that such provisions were regulated and effectively applied. For further details on the institution of Economic Subsidies in Brazil, see Costa (2013).
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sustainability to the expansion cycle of Brazilian economy, based on four action lines: expanding the capacity of supply (expanding investment from 17% of GDP to 21% of GDP), maintaining the robustness of the trade balance (through the expansion of exports), increasing the ability to innovate and strengthening micro and small enterprises. Besides the goal of increasing the investment share in GDP, the PDP also proposed ambitious goals to be achieved at the end of its term (2010). These goals were related to the expansion of private spending on R & D from 0.51% of GDP to 0.65% of GDP, and to increased participation of Brazilian exports in world exports from 1.18% to 1.25%. The PDP was organized around three distinct programs of action: Systemic Actions, Structuring Programs for Production Systems and Strategic Highlights. Thus, this policy combined systemic actions with actions aimed at particular production systems (or set of industries). The first action program (Systemic Actions) aimed at the integration of PDP with other government programs and involved new initiatives, such as tax cuts on investment; expansion of resources and reduction the financing costs for fixed investment; expansion of financial aid for innovation; improvement of the legal framework; improvement of international trade law etc. (Costa, 2013). The Production Systems Structuring Programs gathered the sectors considered strategic in Brazil within three main groups, and set objectives and goals for such groups according to their specificities and considering their development stages. Strategic Highlights (third and last program of action of PDP) dealt with specific public policy issues, which were selected according to their importance for the productive development of the country in the long run. The topics chosen in this action program were the following: (i) support to exports; (ii) support to micro and small enterprises; (iii) integration of Latin America and the Caribbean production systems, focusing on Mercosur; (iv) regionalization, focusing on taking advantage of the capacities and regional potentials, and also on the promotion of productive activities in the vicinity of industrial and infrastructure projects as well as in marginalized areas; (v) sustainable production; and (vi) integration with Africa. Although the PDP has brought important innovations in its provisions, such as the idea of supporting production systems rather than specific industrial sectors, the evaluations conducted to date indicate that its challenging goals and desired objectives have not been achieved. The limited results achieved with the implementation of this industrial policy may be a result of the election of a large number of priority areas and sectors without designing new mechanisms and tools to make possible the attainment of the planned objectives.
9
Alongside the industrial policy in force in the analyzed period (the PDP), in 2006 the Ministry of Science, Technology and Innovation (MCTI) launched the Action Plan for National Development of Science, Technology and Innovation (PACTI) to be implemented between 2007 and 2010. A priority of PACTI was to intensify the interaction between government levels regarding activities of ST&I. Although being a Plan of MCTI, it provided for the interaction with other government departments and consisted of four strategic priorities, divided into 21 action lines. Attracting R&D centers of transnational corporations to Brazil to foster technological innovation was one of the objectives of PACTI (Zucoloto 2009). The government of Dilma Roussef, initiated in 2011, launched the Plan Brasil Maior (PBM) that replaced the PDP and was set to be in force until 2014. The Plan Brasil Maior includes policy measures for industrial, technological, services and foreign trade sectors and is divided into two dimensions: sectorial and systemic. The sectorial dimension aims at: (i) strengthening of production chains; (ii) enhancement and creation of new technological and business skills by encouraging potential enterprises to enter dynamic markets with high technological opportunities; (iii) development of production and supply chains which comprise different forms of energy; (iv) diversification of exports, rooting of foreign companies and incentive to the creation of R&D centers in the country; incentive to the knowledge economy in sectors that are intensive in natural resources. The systemic dimension, in turn, which has a horizontal and transversal character, involves actions to reduce costs, enhance productivity and promote basic conditions for Brazilian companies to face their international competitors; and consolidate the national innovation system through the expansion of scientific and technological skills and their integration in enterprises (Costa, 2013). As it is noted from the main slogan of PBM ("innovate to compete"), innovation plays a central role in this policy. Besides promoting the advancement of the policies initiated in Lula’s government, the PBM intends to encourage enterprises to enter high technology areas, through strategies of diversification by existing domestic firms and through startups. To this end, the MCTI created the National Strategy for Science, Technology and Innovation (ENCTI) that replaces PACTI and comprises the basic incentives to innovation of Plan Brasil Maior. The ENCTI highlights the importance of science, technology and innovation as a structuring pillar in the development of the country and establishes guidelines for the national and regional actions, in the period 2012-2015. The priority objectives of ENCTI are: training of human resources; increasing resources for National Bank for Economic and Social Development (BNDES) to foster innovation; strengthening FINEP (changing this agency into the national bank for innovation and enhancing its budget); and creating, in partnership with the National Confederation of
10
Industry, the Brazilian Enterprise for Research and Industrial Innovation (EMBRAPII), a company that was created following the model of EMBRAPA10. Another fact worth noting in the considered period was the launch of the plan Inova Empresa, which comprises investment in innovation by the federal government, by means of inter-ministerial coordination, and the provision of financial support through credit lines, economic subsidies, investment and financing for research institutions. The budgeted funds for innovation in this plan reach more than R$ 30 billion by 2014. In the scope of the program Inova Brasil, the federal government has chosen priority sectors such as Health, Aerospace, Energy, Oil and Gas, assistive technology and Information and Communication Technology. With the review of the legal framework referred to innovation, the lines of action of the BNDES were expanded. Insofar as innovation has become the key variable of industrial policy in Brazil, the BNDES, a major institution in the implementation of Brazilian industrial policy, has included innovation in both its policy and its operational agenda. Accordingly, since 2003 initiatives have been taken and new programs were created focused on promoting innovation. Some examples of such actions and programs are: the creation of the Technological Fund (Funtec) and of the Program for the Development of the Pharmaceutical Production Chain (PROFARMA). The creation of the Program for Sustainable Investment (PSI) is also worth emphasizing. This program aims to promote the reduction of financial costs and the expansion of financing for investment and innovation. It was implemented in partnership with FINEP, through the allocation of funds from the National Treasury to BNDES. Finally, it is worth noting the review and extension of tax incentives in the scope of the innovation policy in the last decade - the main instruments of Brazilian government for supporting innovation. As was mentioned in the introduction of this article, tax incentives accounted for 55% of federal funds aimed at innovation in the period 2000-2010. The main tax incentives were established in the period of economic liberalization and were revised over the period (Informatics Law)11. The “Lei do Bem” is currently the main mechanism of non sectorial tax incentive for innovation 12. The public procurement policy, which according to the systemic approach is seen as part of the innovation policy, has also changed in this period. The Law 8666 of 1993 that 10
EMBRAPA is the research arm of the Brazilian Ministry of Agriculture and Production, has several applied research centers throughout the country and is arguably responsible for most of Brazilian successful performance in agrobusiness. EMBRAPA follow an organizational model which proved to be successful in providing first-quality research in agricultural and agroindustrial technology and advanced diffusion models. 11 The Informatics Law, enacted in 1991, has undergone minor changes over time. This law provides exemption from the Tax on Industrialized Products (IPI) for manufacturers of electronic equipment that meet the Basic Productive Process (PPB) and, in return, requires from firms that benefit from the tax exemption to invest at least 5% of its turnover in internal and external R & D. 12 For further details on the Law of Goods and other tax incentives for innovation, see Bastos (2012).
11
regulates the purchasing by public sector in Brazil had some of its provisions amended by Law 12.349 of 2010. For instance, the new law established that purchases by the health sector should give a preference margin for products and services that meet the Brazilian technical standards and an additional price margin when such products and services are developed through domestic technology, these price margins being limited to 25% over bids of foreign products or services. This law was also applied for the purchase of telecommunications equipment under the National Broadband Plan (PNBL)13, albeit in a limited way.
4. Analysis of the impacts of recent government policies towards innovation This section aims at presenting and analyzing the impacts of the innovation policy in two dimensions. The first one (presented in the first sub-section) refers to information on governmental support to innovation in Brazil, in what concerns the evolution of the expenditure on science and technology, the distribution of resources for innovation, according to federal support programs and the use of government programs by innovative firms The second dimension (presented in the second sub-section) is related to data assessing the impacts of the innovation policy on selected sectors. 4.1. Governmental support to innovation in Brazil: an overview Figure 2 presents data on the evolution of national expenditures on science and technology as a share of GDP in the period 2000-2010. Overall, it can be seen the positive evolution of total spending in the period as a result of increase in private and public spending. The exception occurs in the case of business expenditure on Science and Technology between the years 2009 and 2010, due to the international financial crisis that have had a negative impact the investment decisions, including those related to science, technology and innovation activities. In general, it is proposed that the improvement of public and private spending on S & T are mainly related to the efforts of industrial and innovation policies adopted over this decade.
13
PNBL is a plan of the federal government that aims at universalizing broadband services in Brazil, through Telebras, to those municipalities which are still not reached by the private operators. For further information about PNBL, see Szapiro and Cassiolato (2013).
12
Figure 2: Public, Private and total Expenditure on Science and Technology as a percentage of GDP: 2000-2010
120
1,80 1,60
1,60
1,40 1,20
1,33
1,30 43,42
44,66
1,40
1,30
48,15
0,73
0,73
0,60 0,40
0,56
0,59
0,68 0,63
1,64 100
1,45
1,29 1,27 1,24 47,64 50,15 48,53 46,85
47,59
0,74
0,76
0,65
0,69
1,26
48,12
1,00 0,80
1,62
0,65 0,61
0,65 0,59
0,63 0,64
0,67 0,63
48,16 0,83 0,77
46,18
48,03
0,87
0,85
0,75
0,79
80
60
40
20 0,20 0,00
56,58
55,34
51,85
51,88
52,36
49,85
51,47
53,15
52,41
51,84
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009 2010(*) 2011(*)
% Public
% Private
Public
Private
53,82
51,97
0
Total
Source: MCT-Brasil, available at: http://www.mct.gov.br/index.php/content/view/308845/Dispendio_nacional_em_ciencia_e_tecnologia_C_T_em_ relacao_ao_produto_interno_bruto_PIB_por_setor_2000_2011.html
Figure 2 also shows the evolution of the share of public and private sector in total national spending on science and technology between 2000 and 2011. It is worth mentioning that during this period there has been a small increase in the share of the private sector spending on S&T. In 2000, public share of S&T expending was 56.6% and the private share was 43.4%. In 2011, this public share was still more than half of the total S&T investments on science and technology, however the private share on the total spending was slightly higher than in 2000 (48%). From the perspective of the use of supporting mechanisms offered by the federal government to manufacturing firms, the analysis of PINTEC data shows a positive evolution between 2000 and 2011, as can be seen in Figure 3. The analysis of PINTEC data reveals a growing percentage of innovative enterprises from the manufacturing industry that used governmental support, either in the form of 13
financing or of tax exception, subsidies and others. Figure 3 shows that, in the period 2000-2003, only 18.7% of the innovative manufacturing firms had used some kind of governmental support. In comparison to the percentage of innovative manufacturing firms that used at least one mechanism of governmental support in the period 20092011, a growth trend can be observed: from 22.9% in the period 2006-2008 to 34.6% in 2009-2011. This last percentage means a figure of about 14.3 thousand manufacturing firms that accessed some governmental incentive for developing innovations either in products or in processes from 2009 to 2011. Figure 3: Percentage of innovative companies that used government programs, Total and according to the type of support 30,0%
40,0%
27,3% 34,6%
25,0%
35,0% 30,0%
20,0% 15,0%
14,1%
18,7%
14,4%
19,1%
20,0% 15,0%
10,0% 5,0%
12,4%
25,0%
22,9%
4,0% 1,4%0,9%0,7%
7,5%
7,1%
6,5% 1,2% 1,1% 0,7%
2,2% 1,9%1,2%
10,0% 2,1%1,5%2,5% 5,0% 0,0%
0,0% 2001-2003 2003-2005 2006-2008 2009-2011 Other support programs Funding for purchase of machinery and equipment Funding for Innovation programs (in partnership with universities) Informatics Law Tax exception for R&D Source: Elaborated with basis on PINTEC/IBGE data.
In the period of 2009-2011 the main incentives used by innovative firms were the funding for purchase of machinery and equipment (27.3%) and “other support programs” (7.5%) that include scholarships offered by the Federal Government (the Program of Human Resources for Strategic Areas - RHAE-Inovação and the National Council for Scientific and the Technological Development - CNPq) and by State Governments (the Foundations for Research Support - FAPs), besides the programs of BNDES and FINEP of funds for venture capital and others such as public procurement, tax incentives granted by the states for R & D development, etc.(7.5%). Also between 2009-2011, the least used mechanisms were the Informatics Law (1.5%) and the 14
funding for R & D and technological innovation projects in partnership with universities or research institutes (2.1%). The innovation survey (PINTEC) also provides data about the use of government programs by firms according to its size. In this case, it is observed that the larger the size, the greater is the proportion of innovative enterprises that relied on government support: 33.4% of those that employ between 10 and 99 people; 40.4% of those with between 100 and 499 employees; and reaches 54.8% of the firms with 500 or more employees. This shows, therefore, that large firms benefit relatively more from the government programs. Figure 4 presents data on the distribution of resources for innovation, according to federal support programs. As already mentioned, data reveals that tax exemption accounted for 55% of the resources. Figure 4: Government’s Support to innovation, 2000-2010 (%), by source of funds 1% 8% 11%
tax exemption FINEP/FNDCT Finep refundable 55%
25%
BNDES refundable BNDES/FUNTEC
Source: Elaborated with basis on Bastos (2012).
The Informatics Law and the “Lei do Bem” are the main basis for tax incentives for innovation. Although the Informatics Law being an important mechanism to promote the production of electronic equipment in the country, it is object of several criticisms for its low effectiveness in stimulating and advancing R&D activities and innovation by the enterprises benefited from tax exemption14.
14
For an in-depth discussion on the evolution of the Informatics Law and its effects, see Gutierrez (2010).
15
The “Lei do Bem”15, which is today the most comprehensive non sectorial tax incentive to R & D activities in Brazil, was envisaged to be the most important policy mechanism to raise R&D investments by firms, especially the large ones. However, criticisms over this incentive to innovation generally point out that it serves just to reduce the costs of R&D spending by firms that were already carrying out R & D. According to Zucoloto (2009), enterprises that already perform R&D activities get, through that law, to reduce the costs of these activities, insofar as they are allowed to rebate a percentage of their R&D expenditure of the payable income tax. Furthermore, it is important to note that only firms that declare net profits can benefit from the “Lei do Bem”, and these are mostly larger companies. Smaller firms generally measure such expenditures differently and therefore are not entitled to benefit from the tax incentives for R&D provided by this law. As a result only few firms have used this mechanism. According to the Ministry of S,T&I,of approximately 46000 innovative firms in Brazil during the 2009-2011 period, only 635 have benefitted of tax incentives of “Lei do Bem”. Hence, the mechanism for promoting innovation based on tax incentives provided by the “Lei do Bem” contributes marginally to encourage innovation investments by large companies. Accordingly, it can be argued that tax instruments have not changed the propensity of companies to invest in innovation, comprising a mere reward to those firms that are already innovative. Anyway, part of the literature that discuss the pros and cons of different types of mechanisms to promote innovation considers tax incentives as only a secondary tool in government’s support to innovation. Thereby, tax incentives as instruments of innovation policy are not able to change the strategies of investment in innovation, but only to contribute to reduce costs of such investments. According to Bastos (2012), the main limitation of tax incentives as instruments to support innovation is the fact that, although affecting spending on R&D as a result of cost reduction, they have limited capacity for encouraging investments, since they neither advance resources nor change the firms’ perception of risk related to the innovation process. Regarding Economic Subsidy to Innovation, although the description of this instrument and its results is out of the scope of this paper, it is worth mentioning the evaluation made by Costa (2013). When discussing the impact of this program, the author concludes that the mode of implementation (by means of Public Bids) and the characteristics of this program made its funds to largely support only research and development activities of enterprises. 4.2. Policy impacts on selected sectors What have been the results of more than 10 years of implementation of several policy mechanisms to support innovation in Brazil? Figure 5 presents information on
15
For a more detailed critical evaluation of the benefits and impacts of the Law of Goods, see Zucoloto (2009).
16
innovation rate and on innovation and R&D expenditures of the Brazilian manufacturing industry for the years 2000, 2003, 2005, 2008 and 2011. Overall, it is observed a small increase in the innovation rate of the manufacturing industry between 2000 and 2008, when it reaches 38.1%, with a subsequent fall in the next 2009-2011 period (to 35.6%). Innovation activities as a share of net sales of the manufacturing industry fall into virtually every period (except for a small increase in the period 2003-2005), and in the last period (2009-2011) this indicator reaches lowest level of the entire series: 2.46%. However, it is worth noting that the share of R & D activities in the net sales of the manufacturing industry grew from the period 2000-2003 onwards, reaching the highest level in 2009-2011: 0.72%. That is, while the expenditure on R & D activities in the manufacturing industry grew in the period considered, expenditures in innovation activities fell in the last three periods. Figure 5: Evolution of R & D and innovation expenditures as a share of net sales and the innovation rate in the Brazilian manufacturing industry: 2000-2011. 45,00%
4,50% 4,00%
Total of innovative expenditure
3.89%
3,50% 3,00%
40,00%
Internal R&D
31.52%
2,50%
Innovation Rate industry 33.36% 33.27% 2.80% 2.48%
35.56% 35,00%
38.11% 2.60%
30,00% 2.46%
25,00%
2,00%
20,00%
1,50%
15,00%
1,00%
0.65%
0.55%
0.58%
0.64%
0.72%
10,00%
0,50%
5,00%
0,00%
0,00% 1998-2000
2000-2003
2003-2005
2006-2008
2009-2011
Source: Elaborated with basis on PINTEC/IBGE data.
This general trend becomes clearer if we try to see what happened in some specific sectors. Below we provide some information for the telecommunications and pharmaceutical industries where more qualitative analyses suggest reasons for the faltering innovation performance of the Brazilian industry (Szapiro, 2012; Szapiro and Cassiolato; 2013; Vargas et alli, 2012). 17
Table 1 presents data about the innovation rate and on innovation and R&D activities in the telecommunications industry in Brazil for the years 2000, 2003, 2005, 2008 and 2011. Overall, the Brazilian telecommunications equipment segment presented a negative evolution of expenditure in innovative activities in the period between 2000 and 2011. As can be seen in table 1, the total expenditure of the segment with innovative activities presented a reduction from 4.97% in 2000 to 2.46%% in 2011. R&D expenditures (both internal and external) as share of net sales revenue of the Brazilian firms are extremely low if compared with those of the main foreign suppliers of equipment. In 2000 the expenditure of the telecom equipment industry in internal R&D was 1.75% from its revenue, in 2003 it was reduced to 1.3% and in 2005 it decreased again to 1.11%. In 2008 the total expenditure of the telecom equipment industry in R&D increased to 1.62% from its revenues, and in 2011 was only 1.25%. This picture of the Brazilian telecommunications equipment industry becomes more challenging if we observe that the average expenditure on internal R&D activities as a percentage of the revenue of the main multinational suppliers of equipment have grown considerably in a similar period (from 9.5%, in 1997, to approximately 15%, in 2007) (Szapiro, 2012). Another relevant indicator that shows significant reduction in the segment of communications equipment manufacturers is the innovation rate (number of innovative firms as a share of the total number of firms of the segment), which declined from 56% in 2000 to 31.7% in 2011. Table 1: Distribution of innovative expenditure by innovative activity as a percentage of the net sales and innovation rate of the telecommunications equipment industry - 2000-2011 Innovation Activity 2000 Internal R&D 1.75 External R&D 0.65 Acquisition of other external knowledge 0.36 Software and equipment acquisition 1.45 Training 0.09 Market introduction of the innovation 0.16 Industrial Project 0.52 Total of innovative expenditure 4.97 Innovation Rate 56% Source: Elaborated with basis on PINTEC/IBGE data.
2003 1.3 0.68 0.1 1.36 0.03 0.62 0.14 4.25 44%
2005 1.11 0.56 0.22 2.78 0.04 0.62 0.17 5.5 46%
2008 1.62 0.88 0.07 0.53 0.04 0.57 0.11 3.75 54.6%
2011 1.25 0.5 0.04 0.4 0.03 0.20 0.03 2.46 31.7%
Is worth noting that, given the significant increase in the use of government support for innovation programs in the period 2009-2011 (which can be seen in figure 7 below), the expected result in the evolution of spending on R & D and innovative activities as a share of net revenues sales of manufacturers of communications equipment companies is different from that observed in Table 1. It should be added that in the case of the 18
communications equipment sector, policies to support innovation were limited to tax incentives derived from the Informatics Law, the funding instruments (refundable and non-refundable) in addition to instruments implemented under the National Fund for Technological Development of Telecommunications (Funttel). Other supporting instruments such as public procurement policy and industry regulation were rarely used in the period considered.
But concerning the Brazilian telecommunications equipment segment, it is important to mention that the industrial and innovative policies were undermined by the impacts of the restructuring process of the telecommunications sector, which included the privatisation of the telecommunications services supply state monopoly. The restructuring process undergone by the Brazilian telecommunications sector as of the end of the 1990 decade produced significant impacts on the structure and dynamics of the national industry of telecommunications equipment. As its main results, we may refer: the raise of imports; the entry of large multinational manufacturers (with the consequent denationalization of the industry and reduction in participation of national enterprises in the market share); the reduction of expenditure in R&D and of innovative expenditure16. In this sense, it can be concluded that the limitation observed in the results of the instruments of government support for innovation in terms of the increase in spending on R & D and innovation activities is associated with the absence of additional (and critical) instruments, which should be the result of implementation of an innovation policy with a more systemic bias. Also important for these negative results of the explicit industrial and innovation policies was the implicit industrial and innovation policies comprised by the restructuring of the telecommunications sector17. The pharmaceutical industry, conversely has showed a distinct picture from the communications industry in terms of the innovation rate and expenditures in innovative activities between 2000 and 2011. Overall, the Brazilian pharmaceutical industry presented a positive evolution of investment in innovative activities in the period between 2003 and 2011. The number of innovative firms increased in the period 20002011, Expenditure with R&D (both internal and external) as share of net sales revenue of the Brazilian pharmaceutical firms has raised from 0.8% in 2000 to 2.4% in 2011. Although these figures are considerably below the average R&D expenditures performed by the major pharmaceutical global companies, it seems to indicate a new 16
For an in depth discussion on the reasons for the decrease in innovation indicators in the telecommunications equipment industry over the analyzed period, see Szapiro (2005), Szapiro (2012) and Szapiro and Cassiolato (2013). 17 Herrera (1995) discusses the difference of implicit and explicit science and technological policies and pointed to the importance of the coordination and coherence between these two groups to the success of the explicit science, technology and innovation policies.
19
pattern of innovative expenditures at pharmaceutical companies in Brazil. Besides, the table shows that the expenditure with equipment acquisition have decreased from 1.6% in 2000 to 0.1% in 2011. The innovation rate in the pharmaceutical industry has risen from 46.8% in 2000 to 63.7% in 2008. The decline in the innovation rate between 2008 and 2011 was probably connected with the global financial crisis in 2008, which have had a negative impact in the innovation rate of the Brazilian manufacturing industry as a whole. Table 2: Distribution of innovative expenditure by innovative activity as a percentage of the net sales and innovation rate of the Pharmaceutical industry 2000-2011 Innnovation Activity 2000 2003 2005 2008 2011 Internal R&D 0.8% 0.5% 0.7% 1.4% 2.4% External R&D 0.7% 0.4% 0.5% 0.6% 0.6% Acquisition of other external 0.3% 0.2% 0.2% 0.1% 0.0% knowledge Software and equipment 1.6% 0.9% 1.1% 1.3% 0.1% acquisition Training 0.1% 0.1% 0.0% 0.1% 0.8% Market introduction of the 1.2% 0.6% 0.8% 0.6% 0.2% innovation Industrial Project 1.0% 0.7% 0.7% 0.7% 0.5% Total of innovative expenditure 5.7% 3.4% 4.2% 4.9% 4.8% Innovation Rate 46.8% 50.4% 52.4% 63.7% 53.8% Source: Elaborated with basis on PINTEC/IBGE data. Elsewhere (Vargas et al, 2012) we argued that such positive result is the outcome of systemic policies aimed at improving technological capabilities at the national firms, that included procurement, targeting of special pharmaceuticals products and firms, etc. The substantial increase in expenditures on innovative activities and, particularly, the considerable expansion in the internal expenditure on R & D of pharmaceutical companies over the decade constitute an important example of a successful set of systemic policies aimed at supporting the sector. The consolidation of the production of generic medicines in Brazil in the early 2000s resulted in an increase of the participation of national companies in the pharmaceutical market and represented an important turning point in the trajectory of growth and innovation of the national pharmaceutical industry. Moreover, in the past few years, new guidelines were set prioritizing health as a strategic aspect of policy mainly including use of government’s purchasing power and improved regulatory framework to support innovation and establish new financing instruments to enhance production activities. Although a detailed consideration of these instruments is beyond the scope of this 20
paper, it is worth mentioning that policies have been guided to support the development of the health complex with aligned policies and actions coordinated by the Health Industrial Complex Executive Committee. At the regulatory forefront, regulatory actions by the Brazilian government are called for to find new windows of opportunity that would allow the development of pharmaceutical and health biotechnology industries in line with health policies and well-being and social needs. There has been a call for regulations to harmonize and articulate public health guiding principles (technical safety standards and economic balance) and the need to promote innovation and competitiveness in pharmaceutical and drug industries. This is reflected in regulatory actions advanced by the Brazilian Health Surveillance Agency (Anvisa) to meet the industry’s demands for the adequacy of regulatory framework. Regarding the use of government’s purchasing power a set of measures and instruments have been implemented aiming to strengthen the production base in health by encouraging development of products with higher added-value and technology content. These measures include a list of priority products in SUS (Brazilian Unified public Health System - Decree 1,284, 2010)18; new regulations on public procurement19 that includes a preference margin for strategic pharmaceuticals and drugs produced in Brazil, and partnerships of private and government drug companies for production development. The list of priority products contains those products that are to be mostly locally produced for their high social and economic relevance and importance in the development of new technological capabilities in health20. As mentioned in section 3, the Public Procurement Act (Law 12,349) aims to incrementally use a preference margin (up to 25%) for procurement of locally produced goods and services due to technological development and innovations in Brazil. And partnerships of private and government drug companies for production development are primarily intended to internalize technology for the production of strategic pharmaceuticals and drugs in state-run companies through technology transfer. Finally, among promotion and funding actions to support the development of the health industrial complex in Brazil are programs aimed to both increase production capacity of the pharmaceutical industry (Brazilian Development Bank Program for Pharmaceutical Production) and its innovation capabilities. For science, technology, and innovation 18
Brazilian Ministry of Health. Decree 1,284, 26 May 2010. It amends the annex to Decree 978/GM/MS, of 16 May 2008 [cited 2012 Oct 12]. Available from: http://portal.saude.gov.br/portal/arquivos/pdf/portaria1284_070710.pdf 19 Provisional Measure 495, 19 July 2010, subsequently Law No. 12,349, of December 15, 2010, amended Law 8,666/93 setting preference margins of up to 25% for Brazilian products in public procurement. 20 Brazilian Ministry of Health, Health Minister Office. Decree No. 978 of 16 May 2008. It provides for a list of strategic products in the Brazilian National Health System to support the development of the health industrial complex. It establishes a Commission to review and update this list [cited 2012 Oct 12]. Available from: http://bvsms.saude.gov.br/bvs/saudelegis/gm/2008/prt0978_16_05_2008.html
21
support, research projects have been funded by two sectorial funds (CT-Saúde and CTBio) to build technological capacity in the areas of interest in SUS and encourage more private investments in R&D in health. Such positive picture becomes more even clearer if we control the data by capital ownership. Figure 6, drawn from a special tabulation of data from PINTEC, shows the total expenditure on innovative activities and internal R & D as a percentage of net revenue from sales of pharmaceutical companies of large firms (with more than 500 employees) by both firms owned by Brazilian or foreign multinationals. As can be seen, expenditures on internal R & D of large pharmaceutical companies of national capital are higher than those of the pharmaceutical multinational subsidiaries in all periods considered. In 2008, we observe the largest gap between the pattern of innovative efforts in these two groups. While pharmaceutical firms of national capital showed an expenditure of 3.6% of net sales in internal R & D activities in foreign-funded enterprises this percentage was less than 1% in the same period. Figure 6: Internal R&D expenditure as a percentage of the net sales in pharmaceutical firms with over than 500 employees, 2000-2011. 4,00% 3.60% 3,50%
3.30%
3,00% 2,50% 2,00% 1,50% 1,00% 0,50%
1.13% 0.67% 0.33%
0.96%
0.97%
1.00%
0.70% 0.22%
0,00% 2000
2003
Internal R&D/sales NATIONAL
2005
2008
2011
Internal R&D/sales FOREIGN
Source: Elaborated with basis on PINTEC/IBGE data.
22
The result observed in the evolution of innovative and R&D activities and of the innovation rate in the pharmaceutical industry can be attributed to a virtuous cycle of development of the national pharmaceutical sector due to a convergence between industrial and technological policy and health policy, aimed at strengthening the productive and innovative capabilities of pharmaceutical companies of national capital.
The evolution of data on spending on innovative activities as a share of net sales and of innovation rate in the communications equipment industry shows a similar trend to that observed in the manufacturing industry as a whole. The main difference is that in the case of the manufacturing industry spending on R & D activities rose during the period considered, contrary to what occurred in the communications equipment industry. However, the decrease in spending on innovative activities and in the innovation rate was accompanied by an increase in the number of companies in the manufacturing industry using government programs supporting innovation (Figure 6). That is, expenditures on R & D grew while spending on innovation activities innovation rate decreases, at the same time the number of companies using the instruments of government to support innovation increases. This apparent contradiction suggests that the focus of innovation policy in funding R & D activities and in encouraging interaction between university and research institute with business is not increasing innovation in the manufacturing industry. The exception is given by the analysis of the pharmaceutical industry, where the available data showed that innovation policy implemented in recent years following a more systemic approach and is, in fact, increasing innovation in this industry. Finally, as regards the analysis of the use of instruments of government support in the pharmaceutical industry and communications equipment Figure 6 shows that in both sectors, about half of innovative enterprises made use of support programs during the 2009-2011 period, a percentage considerably higher than that of the manufacturing industry in the same period (34.6% average). The fact that increasing awareness and use of policy instruments did not lead to more innovation over a 10 year period only adds to the insufficiency of the policy packages to deal with the problems of low innovativeness.
23
Figure 7: Percentage of innovative firms that use government programs on the total manufacturing firms and on the pharmaceutical and communications equipment sectors 60,0% 54.9% 50,0%
50.0%
40,0%
38.7% 32.7%
30,0%
33.6%
25.3% 20,4%
20,0%
16,5%
10,0% 0,0%
18.7%
19.1%
22.9%
34.6%
2001-2003
2003-2005
2006-2008
2009-2011
Total manufacturing industry
Pharmaceutical industry
Communications equipment indsutry
Source: Elaborated with basis on PINTEC/IBGE data.
5. Final remarks This paper sought to discuss the main outcomes of the Brazilian innovation policy in the last decade based on a brief analysis of the industrial and the science, technology and innovation policies in force in the country during this period; on the discussion about the nature of specific mechanisms aimed at fostering innovation; and on a set of data about the use of government programs to support innovation and on spending with innovation by Brazilian companies (pharmaceutical industry, communications equipment industry and manufacturing industry). As a starting point, the relevance of the creation of sectorial funds in the late 1990s was highlighted as a way to recover the public budget of S,T& I and therefore to increase the volume of resources devoted to supporting innovation activities. However, it was from 2003 on that the Brazilian state has effectively adopted explicit industrial policies, within which innovation has increasingly taken the role of key variable. In this context of the industrial policy, a new legal framework was developed to support innovation, especially with the adoption of the Law of Innovation and the “Lei do Bem”, as well as the launch of industrial and technological policies as PITCE, PACTI, PDP, 24
ENCTI and finally the program Inova Empresa, in addition to program of support for innovation within FINEP and BNDES. Based on the presented evidence, it can be claimed that, generally, the innovation policies in the period 2003-2013 have focused on stimulating university-enterprise interaction and on expanding financing instruments for innovation in the enterprises, mainly for R & D activities. In this sense, the program of Economic Subsidy operated by FINEP represented a powerful instrument in support of innovation activities by firms (mainly R&D activities), insofar as it enabled the transfer of a substantial amount of nonrefundable resources to private companies. At the same time, the new legal framework has extended the tax incentives for innovation, making tax exemption to come to represent 55% of the federal resources for supporting innovation in 2010. Another aspect that limited the results of the innovation policy in the last decade is related to the importance ascribed to attracting investment from subsidiaries of multinational companies and the absence of mechanisms for distinguishing between domestic and foreign companies in the entitlement to tax incentives or to financing for innovation. As noted in section 3, one of PACTI’s objectives was the attraction of research centers of foreign companies. Moreover, it should be mentioned that the lack of distinction between domestic and foreign companies in regard to the use of government support for innovation has its origin in the Constitutional Amendment number 6, of 1995, which changed the criteria for a company to be considered national to that of having its headquarters in the Brazilian territory, regardless of the composition of its share capital. However, as it was shown in the case of innovation activities by enterprises in the pharmaceutical industry (figure 5), subsidiaries of multinational companies (with mainly foreign capital share) have strategies that are very different from those observed in companies whose capital share is mostly national, especially regarding expenditures on innovative activities. Although it is necessary to conduct a detailed study on the behavior of domestic firms and subsidiaries of multinationals in different sectors of the economy, the analysis of the differences between the strategies of spending on R & D and innovation by national and by multinational pharmaceutical companies, as well as by telecommunications equipment industry (Szapiro, 2012) shows that, in general, the national companies are the ones which make the highest efforts to develop R&D and innovation in Brazil. That is, for the innovation policy to be more effective and achieve the expected results, it must have instruments rather focused on enterprises whose capital share is mostly national. In short, although innovation has played a central role in the Brazilian innovation policy in the last decade, the analysis of its mechanisms and results points to a limited effect. The main lines of the Brazilian innovation policy are currently directed to encouraging the interaction between the production sector and the infrastructure of science and technology, and to the expansion of the mechanisms for financing innovation activities of firms. In relation to the first line, it is understood that, although the interaction between universities and firms is important to enhance the innovative capacity of the economy, it is not sufficient and has no ability to change the strategies of microeconomic agents. The second line, which is related to the financing of innovative activities and was strengthened by the program of Economic Subsidy to innovation and 25
by the expansion of reimbursable financing from FINEP and BNDES programs, is still overly focused on supporting R & D activities For the systemic approach to innovation process, the R&D activities are only one of the important sources of innovation for the firm. But for most of the sectors of the economy, those activities are not the most relevant ones. Activities like training, acquisition of external knowledge, software and equipment acquisition, market introduction of the innovation and industrial project can be even more important than internal R&D, depending on the sector of activity. Another important aspect of the systemic approach to innovation is that the support to R&D activities should constitute only a part of the innovation policy, that should be combined and complemented by different instruments, such as those aimed at supporting other innovation activities, financing the development of S&T infrastructure and supporting and funding the development of collective actors. Also important for a systemic innovation policy is the use of public procurement policy and of sectorial regulation in order to foster innovation in selected sectors. In this context, the analysis of the recent trajectories of innovative efforts in the pharmaceutical sector becomes emblematic in the sense of contrasting the support policies that have been adopted within the health industrial complex, clearly systemic in character, with what can be considered the general case of industrial and innovation policies that have a markedly linear character. Finally, another limitation of the Brazilian industrial and innovation policy can be pointed: the lack of ability for long term planning. Although having achieved important advances in recent years by introducing the innovation issue at the core of its strategy of action, the Brazilian government has not regained its ability to plan in the long run. For this to occur, it is necessary a coordinated strategy based on the election of priority sectors and activities which can serve as a basis for economic and social development in Brazil. This strategy should also include the search for a new global insertion of Brazilian economy, incorporating both the development of key segments within the new technoeconomic paradigm and a better integration of the Brazilian industry into the new international division of labor within the world manufacturing industry.
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