National Innovation Policy

Pakistan stands today at an unwieldy position in its economic history. After a decade of slow growth the challenge is to launch Pakistan on a new growth path characterized by a sustained high GDP growth of 7 to 9 percent combined with a change in the composition of growth. To ensure rapid poverty reduction requires different performance from the economy by focusing more on productivity rather than just adding factor inputs. The drivers of growth that are generally focused in Pakistan’s growth strategy are aimed at breaking the key bottlenecks, increasing the investment rate, creation of infrastructure, and opening up of the economy. What seems to be missed out in the growth strategy is the national innovation policy for the purpose of increasing total factor productivity.

The national system of innovation in which a firm is embedded matter greatly, since they strongly influence both the direction and the vigor of its own innovative activities. The main reasons why Pakistani firms have low rate of technological innovation are increasingly protectionist trade policies, little competencies in production and research, and the poor institutions of corporate governance.

Innovation is considered as one of the key ingredients in determining a country’s overall competiveness, productivity and hence economic growth. It must be essential part of growth strategy of developing countries to catch up with developed countries as it is also important for improving global competitiveness of a country. Therefore, the World Economic Forum considers innovation as one of the twelve pillars of its widely disseminated Global Competitiveness Index.

Pakistan’s position in this domain continues to deteriorate over the years. According to the Global Competitiveness Report 2013-2014, Pakistan has dropped further nine places and ranks at 133^rd out of a total of 144 countries. Given the crucial importance of innovation for competitiveness on the one hand, and Pakistan’s poor performance on the other, the innovation policy must be central to growth strategy.

Local demand opportunities and competitive pressures will not result in innovation unless firms have the competencies that enable them to respond. Corporate and national competencies in production and in research are essential. Using patents as an indicator of innovation, innovation at the national level is positively influenced by the size of the economy, foreign competition in the domestic market, public expenditure on R&D and the availability of venture capital; it is negatively influenced by the presence of a relatively large number of small and medium-sized firms, high company tax and a high level of economic prosperity [1].

Firstly, the research and development expenditures in Pakistan have always been low. Secondly, there have never been notable efforts to enhance the collaborative leaning and technological development with the help of foreign firms and networks. The model of collaborative learning and collective efficiency is not only confined to Italy, Spain and Germany, but diffused around the world – and under certain conditions, extremely effective for process and product innovation at firm level [2]. For example, Sialkot in Pakistan plays a dominant role in the world market for specialist surgical instruments made of stainless steel. From a core group of 300 small firms, supported by 1500 even smaller suppliers, 90% of production (1996) was exported and took a 20% share of the world market, second only to Germany. In another case the Sinos valley in Brazil contains around 500 small-firm manufacturers of specialist, high quality leather shoes. Between 1970 and 1990 their share of the world market rose from 0.3 to 12.5% and they now export some 70% of total production. In each case the gains are seen as resulting from close interdependence in a co-operative network. The big question is what types of collaborations are most appropriate in case of Pakistan?

Developing innovation culture necessitates establishment of supporting organizational context in which creative ideas can emerge and be effectively deployed. Building and maintaining such organizational conditions involve working with structures, work organization arrangements, training and development, reward and recognition systems and communication arrangements. Above all, the requirement is to create the environment within which a learning organization can begin to operate, with shared problem identification and solving and with the ability to capture and accumulate learning about technology and about management of the innovation process.

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[1] Faber, J., & B., A. H. (2004). Innovation capabilities of European. Research Policy, 33 , 193-207.

[2] Tidd, J., Bessant, J., & Pavitt, K. (1997). Managing Innovation : Integrating Technological, Market and Organizational Change. John Wiley & Sons, Ltd.