How radical is the change in the global distribution of innovation activities is the question up for discussion first this morning here at Sussex.

The answer is “yes, no and I don’t know” says Martin Bell of SPRU Science and Technology Research here at the University of Sussex, who hopefully will explain a little about that response.

Answer 1 – yes – is because global R&D in developing counties has increased from 2% share of gross expenditure in 1970 to 21% in 2000. But what about innovation-effective R&D? Answer 2 – no – is because in the developing countries outside of NICs and China, share of gross expenditure on R&D has hardy improved on the 2% in 1970, up to just 3.4%. Answer 3 – don’t know – is because the data is so woefully bad as to make it practically useless.

Christina Chaminade from the University of Lund, Sweden, agrees that, yes, the data is useless but she has come to a different conclusion to Bell.

There has been 6% R&D in developing countries 2005 but 52% of R&D sites are in US, 22% in Europe, and 90% of world R&D is based in the US and Europe, Lund says.

However, something is changing she believes. Between 1990-2000 some countries moved from one technology club to another. China has abandoned the marginalised technology club and Hong Kong, Singapore and South Korea are now in the advanced technology club.

In just one decade China and India now host 18% R&D sites, up from 8% in 1997. R&D expenditure in China has increased 24% p.a. since 1999. So, says Chaminade, the question is WILL global innovation distribution change given current pace, and will it be global, or just China and India?

Raphie Kaplinsky of the Open University begins with some quotes from Alice in Wonderland to the ends of running faster and faster just to keep up, just like global innovation, he says. It is no longer just about product, but where you position yourself in the global value chain. And we have to think about the global innovation change in terms of what type of R&D countries can take part in. The capacity to move from process to product and function upgrading depends on what market you are selling to. The key challenge for developing countries is to move the buyer, he reckons.

Chaminade now takes a look at China and India, their heavy investment in R&D and the two-way flow to and from those countries, and has a perhaps surprising point of view: “While there is a lot of investment we do not believe China and India will become in short term an innovation hub because there are too many structural problems [within the countries].” Current data is based on very limited data and more research is needed on processes and innovation capabilities – escaping the R&D trap, she says.

But Kaplinksy disagrees. He says: “The pace of catch up in the Asian drivers is overwhelming and I have no doubt they are becoming hubs of innovation and in much faster time than any of us thought possible.”

The reasons he lists for coming to this conlusion include the very substantial increase in the number of home-grown scientists; the significance of the ‘brain drain’ – returning scientists; productivity growth which induces innovation; plus very high rates of savings. – which in China is 48% GDP.

But, as we are at the DSA conference, what does this mean for developing countries? Bell argues that the policy thrust at national level in Africa and donor policies are focusing on the wrong places – in the areas where the gaps are least and not greatest and where the activities and capabilities are most important.

Kaplinsky talks about sub-Saharan Africa where he believes there is a failure of the economic machine – “without growth you are unlikely to get innovation”. But the quality of manpower in Africa is a ”very substantial latent potential” that could rival what has happened in China and India. The idea that selling to export markets means growth of productivity is not true, and selling in to the global economy is not necessarily the way forward, Kaplinsky says.

The growth in inter-regional trade, between African economies, is growing faster than trade with countries outside Africa, he says, adding that Africa’s trade with itself is much more technology intensive. “We are living in an insecure world and Africa will find itself in a more closed environment before and the innovation path there may get more focussed on the domestic needs of people in Africa.”

Ian Scones, co-director of the STEPS Centre asks a question of the panel. Why has no-one talked about the direction of change and asked technology for whom? Can the panel focus less on the flawed macro-economics and more on the politics, direction and consequences of innovation?

Bell attempts to answer – he says the macro-economics were what they were asked to talk about, but says they all did attempt to move away from it. However he agrees with Scoones and says it is important to bring the issue of direction of innovation to the surface. The internalisation of innovation activity is key in shifting the direction ot more pro-poor and sustainable directions.

Shiv Visvanathan, a member of the STEPS Advisory Board, says: “I was stunned by the sentimentality of the session.” and reiterates Scoones’ position.