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Does Innovation and Technology Policy Pay-off? Evidence from Turkey
Erol TaymazDepartment of EconomicsMiddle East Technical UniversityAnkara 06531 Turkey
Knowledge Economy Forum VIII INSEAD, Fontainebleau, France April 28-May 1, 2009
Outline Background: Turkish economy since
1980 Innovation and technology policy in
Turkey R&D in Turkish manufacturing Effects of R&D support programs Economic crisis in 2008 Policy implications
Relative GDP per capital
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
1950 1960 1970 1980 1990 2000 2010
US
= 1
Turkey Korea
Relative productivity (hour worked)
0.00
0.10
0.20
0.30
0.40
0.50
0.60
1950 1960 1970 1980 1990 2000 2010
US
= 1
Turkey Korea
Economic policies 1960-1980: Planned development
Import substitution industrialization Indicative planning
1980-1993: Export-oriented “growth” Export boom, based on real devaluation, low
wages, and export subsidies Trade liberalization
1993-2001: Boom-and-bust cycles 1994, 1999 and 2001 crises
2001-2008: Rapid growth
Innovation and technology policy
1960-1980: Planned development 1960: State Planning Organization 1963: Scientific and Technical Research Council of
Turkey 1980-1993: Export-oriented “growth”
1980: “Turkish Science Policy: 1983-2003” 1989: Supreme Council for Science and Technology
1993-2001: Boom-and-bust cycles 1991-2006: Technology Development Project – Industrial
Technology Project 1993: “Turkish Science and Technology Policy: 1993-
2003” 1996: Seventh 5-Year Development Plan (1996-2000)
2001-2009: Rapid growth in GDP and R&D 2004: Vision 2023
Milestones Policy commitment
Supreme Council of Science and Technology Policy conception
Establishing a well-functioning National System of Innovation
Policy tools R&D support programs
TTGV, R&D loans (1992) TUBITAK, R&D grants (1995)
Milestones Institutional setup
Public R&D institutions Universities Turkish Patent Institute Turkish Accreditation Agency National Metrology Institute Competition Authority Innovation Relay Centers Technoparks etc
National system of innovation
National system of innovation
Policies in 1993-2008
Objectives Related ProgramsRaise private R&D and innovation
Risk Sharing Facility Support, Support Programme for the first R&D Projects of SMEs, Environmental Technologies Support Programme, Energy Efficiency Support Programme, Renewable Energy Support Programme, R&D Tax Exemption, Support for R&D Investment, State Support for R&D (TTGV), State Support for R&D (TUBITAK-TEYDEB), Technology Research and Development Support
Increase the commercialization of knowledge by universities and public research institutes
Industrial R&D and innovation support (San-Tez) of MoIT, Patent Support Program, Scientific and Technological Cooperation Networks and Platforms Support Programme (ISBAP), Commercialization Project Supports, Support for Establishment of Technoparks (the Law on Technology Development Zones), Joint Technology Development Projects, Young Entrepreneur Development Programme, Industrial Property Rights Support
Expand the number of science based start-ups
Support Programme for Technology- and Innovation-focused Entrepreneurship, Start-up Support, Pre-Incubation Support Programme, New Entrepreneur Support, Establishment of Technology Development Centers (TEKMERs)
Augment technology diffusion (including ICT use)
Environmental Technologies Support Programme (also for private R&D above), Energy Efficiency Support Programme (also for private R&D above), Support for Hiring Qualified Personnel by SMEs, ICT Support, Machinery/Equipment Support for Common Use by SMEs, Training Support, Consultancy Support for SMEs
Effects of R&D support programs
Effects of R&D supportR&D support
More R&D
Additionality, competitive pressures
Better R&D
Performance (productivity and growth)
R&D/GDP ratio
0.0
0.2
0.4
0.6
0.8
1.0
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
(per
cen
tag
e p
oin
t)
Old series New series
Number of R&D personnel
0
5
10
15
20
25
30
35
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Nu
mb
er o
f p
erso
nn
el p
er 1
0000
peo
ple
R&D personnel Researcher
R&D expenditures by performer
0
500
1000
1500
2000
2500
3000
3500
2000 2001 2002 2003 2004 2005 2006 2007 2008
(mill
ion
TL
, 200
8 p
rice
s)
Public Private Higher education
R&D support
0
100
200
300
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
R&
D s
up
port
(m
illio
n T
L, 2
008
pric
es)
0
1
2
3
4
5
6
7
8
9
10
Sha
re o
f R
&D
su
bsid
ies
(%)
R&D support
Share of R&D subsidies
Methodology Panel-data econometrics
Sample selection models Propensity matching estimates
Difference-in-difference estimators
Taymaz, E. and Ucdogruk, Y. (2009), “Overcoming the Double Hurdles to Investing in Technology: R&D Activities of Small Firms in Developing Countries”, Small Business Economics (forthcoming).
Ozcelik, E. and Taymaz, E. (2008), “R&D Support Programs in Developing Countries: The Turkish Experience”, Research Policy (37): 258-275.
Data sources Annual Survey of Manufacturing Industries
10+ 1980-2001 About 10,000 establishments each year
R&D Surveys All R&D performers 1992-2005 About 300 firms each year
TTGV and TIDEB clients All TTGV and TIDEB clients 1992-2005
Effects of R&D support programs
Large firms are more likely to conduct R&D. Although SMEs are less likely to conduct R&D,
R&D intensity is higher in small than large firms.
Technology transfer is likely to be a complementary activity for in-house R&D for large firms.
Effects of R&D support programs
R&D support has a strong effect in raising R&D intensity of R&D performers.
The effect of R&D support is even stronger for small firms.
R&D support has a positive impact on the employment of R&D personnel (no wage effect).
Effects of R&D support programs
When the market share of R&D support recipients increase, other firms (competitors) tend to increase their R&D intensity as well.
R&D performers are more productive.
R&D support has a positive impact on R&D in Turkish manufacturing (more R&D).
R&D support has a positive impact on the way firms conduct R&D (better R&D).
Effects of R&D support programs
The case of Arçelik Leading consumer durables producer in Turkey
Established in 1955 Net sales in 2008: 3,574 million € Exports: 50 % of sales Number of employees in 2008: 18,000
Leading innovative company 101th firm in the world in patent applications (2007) Received 10 % of all patents granted in Turkey
Established its R&D center in 1991 Received R&D loans from TTGV since 1992
Strength and weaknesses Strengths
Institutional setup Diverse set of R&D supports Public R&D and universities
Weaknesses Lack of a long-term, coherent, systematic vision Lack of coordination between policy
organizations Lack of policy learning Too much emphasis on “supply-side” policies No accumulation of technological capabilities
Economic crises in TurkeyIMPORTS
-1.20
-1.00
-0.80
-0.60
-0.40
-0.20
0.00
0.20
0.40
0 1 2 3 4 5 6 7 8 9 10 11 12
1994 2001 2008
Economic crises in TurkeyEXPORTS
-0.40
-0.30
-0.20
-0.10
0.00
0.10
0.20
0.30
0.40
0 1 2 3 4 5 6 7 8 9 10 11 12
1994 2001 2008
Economic crises in TurkeyShares of electricial machinery and motor vehicles in total exports
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
0.18
Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09
Electrical machinery
Motor vehicles
Economic crisis in 2008
Measures Reductions in tax rates (value added tax
and special consumption tax – motor vehicles)
Reductions in labor cost (temporary work support, deductions in social security contributions)
Incentives for “clustering” for textiles Short term employment in the public
sector
Policy conclusions Does Innovation and Technology Policy
Pay-off? Could it be more effective?
Thanks for listening…