Innovation risks to sustainable development

The goals of the sustainable development agenda promoted by the United Nations are highly relevant to sustain the progression of the human race. One of the key challenges has been to meet growing consumption with a depleting resource base and worsening environmental issues. Irrespective of the financial resource mobilisation, like Bangladesh's estimated need for above $900 billion by 2030, scaling up of existing productive activities alone cannot meet many of the crucial goals like hunger and climate change.

Given the situation, it seems there is a strategic tool left to be further explored. That is to keep innovating better means of production techniques. As Nobel Laureate Paul Romer observes, "economic growth springs from better recipes, not just from more cooking." New ways of mixing ingredients generally produce fewer unpleasant side effects and generate more economic value from per unit of raw material. At this juncture, the human race is facing limitations to growth to meet many of the SDGs due to finite resources, and undesirable side effects would pose if no new recipes or ideas were discovered. This reality tells that ideas driving product and process innovation in producing increasing utility by consuming fewer materials, water and energy, while producing less wastage and causing less harm to the environment and climate change effect is our only option. But, is innovation benign? Is there a clear path of pursuing innovation, particularly for developing countries, to achieve sustainable development? Instead, despite the importance, does innovation pose a threat to derail the progression of developing countries?  

Innovation is a process of finding better ways to arrange productive resources to address individual or social needs. In a competitive market economy, firms and other actors, who interact within learning networks through linkages, carry out this process. To better benefit from science, technology and innovation (STI) for progressing with SDGs, there is a need to recognise the roles and capabilities of all key actors in the innovation system. Some of these actors are: (i) firms and entrepreneurs, (ii) research and education system, (iii) intermediary organisations, (iv) consumers/users, (vi) civil society and citizens, and (vii) government. All these actors influence the process of knowledge creation and absorption and its conversion into innovation. Firms and entrepreneurs are at the core of the innovation system by playing the role of connecting different types of knowledge to bring innovative goods and services to the market through creative processes. Research and education system plays the role of creating and supplying knowledge along with human capital for empowering firms to absorb knowledge to innovate. Intermediary organisations such as advisory firms and business associations facilitate the identification of relevant knowledge, supporting knowledge transfer, and building management capabilities for knowledge absorption and conversion to innovation. Consumer preferences influence the consumption of innovation. Civil society and citizens influence consumer preferences and also the role of the government. The government plays a vital role in supplying the knowledge and encouraging as well as compelling and empowering firms in creating, absorbing, and transferring knowledge into innovation. 

In developing countries, value addition in productive activities through innovation is very negligible. There appears to be a market failure due to the weakness in both supply and demand. In the 1950s, advanced countries pursued a linear, science-push model to address market failure. In pursuing state-sponsored missions like defence, telecommunication, and transportation, the US, former the Soviet Union, and other western countries ramped up the supply of resources to academic and research institutions to increase the supply of scientific knowledge. Among others, the newly found flow of knowledge was used to invent technologies for innovating weapons and military logistics like satellite communication, computers, radar, cellular communications, the internet, and many more. By achieving mission objective and also by trading technology-intensive military equipment to the rest of the world, advanced countries kept monetising the investment made in basic science and technology invention. Through the process, defence contractors also kept improving technologies, making them suitable for civilian innovations.

Moreover, such mission-led R&D programmes also created human capital empowering private firms to absorb newly found knowledge and technologies and fine-tune them to innovate commercial goods and services. Such a linear model created large-scale commercial success stories like the Silicon Valley in California. To benefit from innovation, many developing countries are investing in replicating Silicon Valley's innovation ecosystem, though often in vain. To leverage innovation for attaining SDGs, it appears imperative for developing countries to accelerate R&D finance and build physical facilities like high-tech parks. But due to the absence of customers (often defence) at an early stage of development, and weak knowledge absorption capacity of firms, such approach of benefiting from innovation following linear model runs the risk of failure.

It's being observed that due to the weak capacity of actors and linkages between them, developing countries are often failing to benefit even from available knowledge. This could be termed a system failure. On the one hand, governments of developing countries are offering diverse incentives for creating profitable, productive opportunities for private firms, based on value addition out of labour and natural resources. As a result, there has been neither demand for knowledge to private firms nor the absorption capacity. On the other hand, limited academic and research capacity has been busy producing knowledge for making publications, having virtually no relevance to local productive activities. This system failure must be addressed by creating demand for knowledge at the firm level, increasing firms' knowledge absorption capacity, influencing education and research system to produce local productivity enhancement related knowledge, and addressing barriers of linkages. For making effective and efficient usages of resources by leveraging innovation for attaining SDGs, developing countries must address this system failure.       

There appears to be another type of innovation risk; that is a directional failure. In a market economy, firms are competing to make a profit, often by substituting labour with technology, and by accumulating market power out of technology innovation. The continued progression of labour substituting technology innovation has the potential to reduce wastage, increase safety, and lower cost of production, consequently making a contribution to certain SDGs. On the other hand, the labour-substituting effect runs the risk of creating unemployment at the bottom of the pyramid, damaging other SDGs. Moreover, monopolies spanning national boundaries, particularly in digital space, pose a serious threat to SDGs.  With the unfolding realities, it appears that STI policy designed to address economic policy objectives by ensuring efficient functioning of the innovation system, keeping both market and system failures in mind, runs the risk of suffering from directional failure. Due to fragile local innovation capacity, developing countries are highly vulnerable to this risk of directional failure. Reorienting STI, formulating broad economic and industrial policies to address the sustainable development goals appear to be a burning issue, from both global and local perspectives. It's time to address system failure and to have the optimum balance between how far STI policy remains 'neutral' regarding the nature and direction of economic growth, and consequential effects on jobs, and environmental and social issues pertaining to sustainable development.  

M Rokonuzzaman PhD is an academic and researcher on technology, innovation ands policy.

zaman.rokon.bd@gmail.com