This chapter explores the health and disability challenges of ageing societies and the potential contribution of science, technology and innovation in the near- to medium-term to meeting those challenges. In the coming years, science and technology, and particularly information and communication technology applications, will play an important role in achieving that the elderly remain as healthy, as autonomous and as active as possible.The chapter begins with an overview of worldwide demographic developments to 2050, before turning to the impending difficulties of matching the rising demand for elderly care with an adequate supply of carers. It presents examples of scientific and technological innovations which are on the horizon or already in the pipeline. The chapter looks at spending on national and international age-related research programmes and projects, and suggests policy areas on which efforts might focus in order to facilitate the introduction and diffusion of technological advances that promise to strengthen older people’s health, independence and active involvement in society.

This chapter addresses three related aspects of innovation for development in developing and emerging economies. Why is it important for emerging and developing countries to encourage innovation? How can innovation affect social inequalities (inclusive development)? How can emerging and developing countries seize the opportunities offered by globalisation to harness innovation? In discussing the role of innovation for development it shows that innovation plays a fundamental role as a driver of growth and as a means of addressing social challenges. Notably, building up innovation capacity, promoting niche competences and gaining competitiveness in frontier industries are objectives that support growth. It looks at inclusive innovation and the implications for different groups in the society, with attention to innovative products for and by middle- and low-income households and the effects of innovation on productivity differences and inequality. The implications of the global context for these countries’ innovation objectives are also considered. While openness offers opportunities to tap into global knowledge stocks, the development of innovation capacity in national industries requires supportive policy measures. The discussion also addresses trade-induced specialisation patterns and the question of industrial policies.

The term governance is generally ill-defined and has gained a range of meanings. For the purposes of this profile, the definition of STI governance is limited to the set of publicly defined institutional arrangements, including incentive structures and norms, that shape the ways in which various public and private actors involved in socioeconomic development interact when allocating and managing resources for innovation. The emphasis on interaction naturally raises issues of co-ordination, and failures in governance are, more often than not, related to failures of co-ordination.

The role of evaluation is to generate information about the appropriateness and effectiveness of public policy interventions. This information can be used to assess and enlighten processes of learning around policy practices and performance, stimulate discussions among actors (e.g. about appropriate evaluation criteria), signal quality and reinforce reputations (e.g. in public research), and allow policy makers to account for public spending choices. Evaluation results may prompt a re-positioning of policies and programmes, shape the allocation or re-allocation of public funding (e.g. more generous block grants to top-performing universities) and inform the development of national STI strategy.

Financing is extremely important for innovation and growth, in particular at the seed and early stages of business development. Access to finance is a central issue for both innovative entrepreneurs and policy makers. Entrepreneurial start-ups and small and medium-sized enterprises (SMEs) face financial constraints largely because of their inherent riskiness and weaknesses. Evidence shows that innovative SMEs in the euro area considered access to finance one of their most pressing problems following the sovereign debt crisis in 2011 (EC, 2011a).

Tax incentives for R&D are often considered to have certain advantages over direct support for R&D, such as procurement of R&D or grants. As a market-based tool aimed at reducing the marginal cost of R&D activities, they allow firms to decide which R&D projects to fund. They are expected to lead to an increase in private investment in R&D and in turn to a rise in innovation outcomes and ultimately to higher long-run growth. They can also boost R&D start-up decisions. Potential downsides include 1) higher wage levels for researchers because more R&D increases demand for their skills (hence part of the government foregone revenue dilutes in rising cost instead of a volume increase) and 2) (re)location of R&D activities (tax competition between countries or between regions).

With lagging productivity and slow job growth, many OECD governments are looking for new sources of growth and have also recognised the importance of services in this regard. Services already account for around 70% of gross domestic product (GDP) in OECD countries. The expansion of services has largely been fuelled by globalisation and widespread use of information and communication technologies (ICTs) to provide more standardised services (health, education, government services). New market opportunities for services are also created by deregulation and privatisation of the public sector (financial, telecommunications and energy services) as well as by outsourcing of activities by manufacturing firms.

In spite of long-standing efforts to boost innovation performance through supply-side policies, such as public support to higher education and research, some OECD countries face a persistent innovation paradox: high or rising research and development (R&D), but low rates of innovation. Today, demand-side innovation policies – from public procurement of innovation, to standards and regulations, to lead markets and user-/consumer-driven innovation initiatives – are gaining ground in OECD countries (see policy profile on innovation policy mix for business R&D and innovation in Chapter 6). This trend reflects the adoption of a broader approach to innovation policy that addresses the full extent of the innovation system and cycle. In a context of fiscal consolidation, there is also interest in using demand-side policies to leverage innovation without creating new programmes. An additional focus is innovation to meet strong societal demand in key sectors (e.g. health, environment, energy).

Public support of entrepreneurship is often justified by perceived market failures that affect business creation and by the positive impact of business dynamics on economic growth and job creation. Public policies for entrepreneurship are often motivated by evidence demonstrating the impact of young innovative firms on economic growth and job creation. Policy makers also seek to address perceived market failures for start-ups, including information asymmetries and financing gaps.

Public research, i.e. research primarily funded with public money and carried out by public research institutions (PRIs) and research universities, plays an extremely important role in innovation systems by ensuring the provision of new knowledge. Public-sector research is considerably smaller than business research and development (R&D) in the majority of OECD countries: government intramural expenditure on R&D was on average 0.29% of gross domestic product for the OECD area in 2009, and higher education expenditure on R&D was 0.44% (including a small percentage funded by business), while business expenditure on R&D stood at 1.69%.

Innovation in the public sector refers to significant improvements to public administration and/or services. Drawing on definitions adopted for the business sector (Oslo Manual) and their adaptation in the Measuring Public Innovation (MEPIN) project, public-sector innovation can be defined as the implementation by a public-sector organisation of new or significantly improved operations or products.

Clusters are a geographic concentration of firms, higher education and research institutions, and other public and private entities that facilitates collaboration on complementary economic activities. While some of the world’s leading clusters specialise in high-technology industries (e.g. Silicon Valley, Bangalore) they are also found in sectors ranging from wine making to automobiles to biotechnology.

While science has always been open – indeed openness is critical to the modern scientific enterprise – there are concerns, and some anecdotal evidence, that the processes for producing research and diffusing its results have become less open. There are several reasons. First, science is increasingly data-driven and expensive, but access to scientific data is often subject to administrative, legal and privacy regulations. Access also requires adequate information and communication technology (ICT) infrastructure. Other limits on openness in science include policies and practices at universities that place a premium on patenting over publishing and weak incentives for researchers to share data. This can also act as a barrier to the replication and validation of scientific experiments. Finally, the policies and practices of scientific publishers that limit web-based access to research results may also make access to scientific data less open.

The transfer, exploitation and commercialisation of public research results is a critical area of science, technology and innovation policy. Efforts to ring-fence public research in a context of fiscal austerity in many OECD countries – as well as competition from new players in Asia – have increased pressure on universities, public research institutions (PRIs) and governments to increase the economic outputs from and impact of investments in public research.

A patent is a legal title that gives the holder the right to exclude others from using a particular invention. If the invention is successful on the market the patent holder will profit from its monopoly power. Patents therefore allow inventors to internalise more of the benefits they generate: without such a mechanism inventions would be immediately imitated and inventors’ return on their investment would be reduced. Patents are granted in return for disclosure of the invention: they therefore play a role in the diffusion of knowledge. Inventors and firms apply for patents at patent offices, which grant (or reject) patents for their jurisdiction (domestic market), in accordance with their legal statute. Most patent offices are national; the main exception is the European Patent Office (EPO).

Intellectual property rights (IPRs) such as patents, trademarks, designs and copyrights are increasingly traded in markets. Public policy plays a role in shaping the evolution of IP markets and thus their impact on innovation. In today’s highly networked world, the circulation of ideas is vital to innovation. Inventors, designers and authors are not always best placed to exploit their knowledge. Organisations are therefore increasingly adopting open innovation practices, but high transaction costs often impede the successful negotiation of licences or other types of agreements.

Countries engage in international (including bilateral and multilateral) co-operation in science, technology and innovation (STI) with a view to tapping into global pools of knowledge, human resources and major research facilities, to sharing costs, to obtaining more rapid results, and to managing the large-scale efforts needed to address effectively challenges of a regional or global nature.

Human resources have an embodied stock of human capital – defined as the knowledge, skills, competences and attributes that facilitate the creation of personal, social and economic well-being – which is an essential input to innovation. Given the importance of human resources for innovation, key objectives of human resource policies have been to raise the level of knowledge and skills of the labour force. Particular policy objectives have included meeting the need for skills for innovation by enlarging the supply of the highly skilled workforce and by facilitating its mobility in order to optimise the use of human resources, to facilitate the cross-fertilisation of ideas and learning, and to address structural mismatches of demand for and supply of skills.

Three decades ago the OECD Declaration on Future Policies for Science and Technology underscored the importance of raising awareness of science and technology (S&T), and recommended public participation in the definition of major technological orientations. This includes public access to information concerning foreseeable long-term impacts of S&T and fostering public understanding of science and technology. Furthermore, it is increasingly recognised that innovation is influenced by certain social and cultural values, norms, attitudes and behaviours which may be described as an innovation culture. More and more governments therefore consider it important to foster and strengthen an innovation culture through policy measures, based on the assumption that cultures and social behaviours are amendable.

The economic cost of natural catastrophes and man-made disasters worldwide amounted to USD 370 billion in 2011, a huge increase over the previous year. The Japanese earthquake and tsunami alone cost the national economy at least USD 210 billion. Science and technology play an increasingly vital role in managing natural disasters. To this end, a growing number of OECD countries have recently established programmes or incentives to develop and deploy information and communication technologies (ICTs), geographic information systems, and remote sensing and satellite data ().

A range of dynamic new disciplines and technologies are reshaping the landscape in terms of what science can achieve. Biotechnology, genomics, nanotechnology, synthetic biology and new developments in information and communication technologies (ICTs), physics, engineering, sustainable growth and the search for alternative sources of energy are now part of national research agendas and are seen as instrumental in meeting global challenges as well as societal needs at home. They are also seen as strong contributors to future economic growth in an increasingly technology-driven world.

Focusing innovation policy on developing capabilities in high-impact priority areas and sectors: the agri-sector, software, bio-and nano-technology, health and alternative energies.

Transitioning to a low-carbon, globally connected and productive economy through advanced skills.

Reforming and restructuring education as part of the broader innovation system.

Addressing expected shortages in human resources in S&T.

Supporting innovation to expand the basis for environmental sustainability and developing a low carbon economy.

Increasing the R&D intensity of firms via a mix of indirect and direct funding.

Strengthening the science base to reach OECD benchmarks.

Promoting indigenous innovation capability, especially among Chinese firms.

Strengthening governance of STI.

Increasing the efficiency and flexibility of R&D institutes and simplifying R&D support.

Reversing the trend in labour productivity decline by boosting innovation.

Enhancing involvement of the business sector in R&D and innovation.

Improving Estonia’s long-term growth through:

Internationalising education, research and innovation and reforming PRIs.

Pooling research resources and activities to strengthen the system’s international visibility.

Maintaining a lead in eco-innovation, addressing demographic change and ageing.

Improving framework conditions for innovation.

Increasing innovative domestic firms.

Restoring and rebuilding capacity in STI and increasing industry R&D.

Developing clean and green technologies to combat climate change.

Accelerating the implementation of investment policy reforms.

Prioritising fourteen research areas over the next five years.

Leveraging the scientific and technological labour force by supporting entrepreneurship and better linking scientific research and private industry.

Improving the framework conditions for innovation.

Reconstructing and revitalising economic and social infrastructure destroyed by the Great East Japan Earthquake.

Achieving more balanced and sustainable growth with a strong, innovative SME sector.

Developing and consolidating the S&T infrastructure.

Investing in human resources at all levels.

Building on strengths by focusing on the top nine performing sectors.

Providing long-term goals and clear governance of the innovation system.

Continuing economic diversification, building on the resource base and other strengths.

Implementing policies for a knowledge-based economy.

Strengthening the commercial impact of public research and evaluating its performance on a regular basis.

Increasing firms’ innovation activities and strengthening the research activities of universities

Reversing the downward trend in private investments in R&D and ensuring support for businesses to engage more in R&D.

Implementing the Research and Innovation Strategy (RISS).

Strengthening innovation capacity in the business and public sector to boost economic performance and address social challenges.

Improving the quality of human resources at all levels.

Commercialising research from HEIs.

Strengthening Switzerland’s leading position in global research and innovation.

Becoming Eurasia’s production base for medium-high- and high-technology products.

Encouraging closer relations between universities and business.

Creating a 21st century workforce and research infrastructure.

Chapter 10 presents, in a series of country profiles, the main features, strengths and weaknesses of national STI systems and major recent changes in national STI policy. This annex describes the conceptual background, sources and methodology used to design these profiles.