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Igniting Innovation: Rethinking the Role of Government in Emerging Europe and Central Asia

In the chapters to come, the authors will encounter again and again the dilemma facing policymakers dealing with public goods such as innovation and technology flows: countries cannot do without government intervention, but with government intervention, the probability of government failure is high because it is so tough to get the design and implementation right.

The book, titled "Igniting Innovation: Rethinking the Role of Government in Emerging Europe and Central Asia," is a call for the ECA region to take dramatic steps to position itself closer to the scientific and technological frontiers and regain the lead in regional or even global settings. It explores why and how ECA countries should use innovation and absorption to pursue faster growth, starting with the rationale for public intervention and support.

The book analyzes four aspects of the innovation system: international collaboration, research and development institutions, government financial support instruments, and the investment climate.

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Chapter 1. Why innovation matters—and what the government should do about it.

As policymakers in Europe and Central Asia (ECA) debate ways to increase and maintain productivity and economic growth—and speed up convergence with Europe—they need to find ways to create an environment that is conducive to the application of knowledge in the economy through innovation and learning.

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Chapter 2. Acquiring technology from abroad—leveraging the resources of foreign investors and inventors.
A key driver of economic growth, industrial development, and raising worker productivity is a country’s absorptive capacity, or ability to tap into the world technology pool. But the process of knowledge absorption is neither automatic nor costless. Rather, it is often the case that extensive, active efforts are required to take technology pioneered outside theregion and adapt it - in large and small ways - to the economic circumstances of ECA countries.

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Chapter 3. Connecting research to firms—options for reforming the public RDIs.
In many OECD countries, RDIs occupy an important role in the national innovation system—clients often include small firms that lack the capability and market intelligence to identify their own technological, organizational, and managerial needs. However, RDIs in ECA have yet to complete the transition to the region’s new economic realities. There are essentially seven options for restructuring RDIs.

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Chapter 4. Bringing innovations to market—boosting private incentives through public instruments.
To bring innovation to markets, governments need support instruments that promote private risk-taking and stimulate markets for private risk capital. Some support instruments have proved more effective than others in OECD countries, but it is also abundantly clear from the experiences in emerging countries that they will not work without a friendly investment climate, adequate intellectual property legislation, and built-in mechanisms to avoid corruption and regulatory capture in project selection.

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