Strategic Research

This service module assists developing countries and economies in transition to monitor, benchmark and analyze their industrial performance and capabilities, and on that basis to formulate, implement and monitor strategies, policies and programmes to improve the contribution of industry to productivity growth and the achievement of the UN Millennium Development Goals (MDGs).

Only a few developing countries have been able to upgrade their industrial performance and capabilities and, by doing so, to succeed in productivity catch-up with the advanced industrial countries in the new global setting. The UNIDO Industrial Development Scoreboard reveals that the gap between the least developed and the industrialized countries is widening. Per capita manufacturing value added in the industrialized economies was 83 times that in the least developed countries in 1985. By 1998, the rate had soared to 144 times.

Under the new conditions of globalization and persistent technological change, the only path to enhance productivity growth and to achieve the MDGs is for domestic industries to compete through innovation and technological upgrading. This means to learn to upgrade continuously, develop product and process technologies, and enter into more technologically complex industries. This innovation and learning process is driven by the development of entrepreneurial, technological and managerial capabilities.

Industries in developing countries are generally not at the technological frontier. They innovate and upgrade their capabilities by mobilizing and learning to use efficiently technologies existing in more advanced and industrialized countries. They follow what UNIDO calls a strategy of linking, leveraging and learning ("the LLL strategy"): they identify and link with external partners which have the technologies and skills they need to up-grade their products and processes and to innovate; they leverage as much as possible the knowledge from these external relationships; and they invest in learning to adapt and use these new product and process technologies in their firms and clusters.

Pursuing an innovation and learning strategy takes more than just opening up to world market forces. It requires the development of global linkages with business partners and sources of technology combined with a continuous upgrading of domestic capabilities and skills. This strategy is driven by entrepreneurial firms and clusters supported by a system of institutions and organizations which provide the incentives and the public goods needed by the firms to innovate and learn. The industrial clusters and their support institutions form an innovation and learning system.

Market framework conditions including macroeconomic stability and liberalization policies are necessary but not enough to trigger a process of innovation and upgrading of capabilities in domestic industries. What is also needed are new forms of industrial governance systems based on partnerships between the public and private sector to formulate and implement strategies, policies and programmes to stimulate the process of innovation and learning of domestic industries and to support the organization of an efficient innovation and learning system.

The main responsibilities of the industrial governance system include:

• Causing the actors of the innovation and learning system, the private sector, the support institutions and the government agencies, to analyze and benchmark the performances and capabilities of their domestic industries;
• Developing a vision and a strategy to enhance productivity, innovation and learning;
• Formulating and implementing an integrated set of policies and programmes to promote innovation and learning, and to strengthen the innovation and learning system; and
• Continuously monitoring the implementation of the strategy and assessing the impact of the policies and programmes.